Weidmann Says ECB Won’t Cut Interest Rates to Weaken Euro
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European Central Bank council member Jens Weidmann said an appreciating euro alone won’t trigger a cut in interest rates and the exchange rate’s gains are justified by the economic outlook.
The strength of the euro “is one factor among many in determining future inflation rates” and “we will certainly not justify any monetary policy decision with one single factor,” Weidmann, who heads Germany’s Bundesbank, said in a Feb. 13 interview. “I believe that the exchange rate of the euro is broadly in line with fundamentals. You cannot really say that the euro is seriously overvalued.”
His comments come as central bankers and finance ministers from the Group of 20 nations meet in Moscow today amid speculation of a currency war. Looser monetary policy in the U.S. and Japan combined with mounting optimism in Europe drove the euro to 14-month and three-year highs against the dollar and the yen earlier this month. The currency has dropped two cents since ECB President Mario Draghi said on Feb. 7 that its appreciation poses a downside risk for inflation, signalling he may consider cutting rates.
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