January 25, 2018 / 2:03 PM / a month ago

ECB's Draghi says euro strength is a source of uncertainty

FRANKFURT (Reuters) - The euro’s recent rise on foreign exchange markets is a source of uncertainty for the euro zone’s inflation outlook and European Central Bank policymakers, ECB President Mario Draghi said on Thursday.

The common currency has rallied 5 percent against the dollar in recent weeks, complicating the ECB’s path out of its massive stimulus program by threatening to curb a tepid recovery in euro zone inflation.

“The recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability,” Draghi told a news conference following the ECB’s regular policy meeting.

A stronger currency makes exports from the bloc dearer and imports cheaper, undoing some of the ECB’s multi-trillion euro efforts to stimulate price growth in the euro zone.

The rally in the euro EUR= against the dollar has been given fresh momentum this week by U.S. Treasury Secretary Steven Mnuchin, who welcomed a weakening of the greenback.

Draghi had said in a letter published on Wednesday that exchange rate shifts were a side effect, not the objective, of ECB policy.

Reporting By Francesco Canepa; Editing by Catherine Evans

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