ECB eyes on exchange rates

European Central Bank (ECB) President Christine Lagarde said they were monitoring the changes in currencies very carefully. It is almost certain that the European Central Bank (ECB) will reduce interest rates at its June meeting, but uncertainty about the period after June is increasing due to Fed Chair Powell's statements. In an environment where the US does not cut interest rates, there is a risk that a prolonged monetary expansion in Europe could negatively affect the euro currency. Speaking in Washington on Wednesday, ECB President Christine Lagarde said that although they were not targeting a specific level for the euro, bank officials would be monitoring the fluctuations “very carefully.” “Although we have a single authority whose primary goal is price stability, we certainly need to take into account the impact of changes in the exchange rate on our inflation,” said Lagarde, adding, “This movement in currencies may have an impact on inflation through imported inflation.” Also speaking in Washington, ECB Governing Council member Bostjan Vasle said that the ECB could not completely ignore inflation dynamics and monetary policy in the US as it charts its own course. “The economic situation in the US is different from the eurozone right now,” Vasle said, adding, “So it is logical that the response of monetary policy could be different. But there are limits to this divergence.”