(Bloomberg) — The European Central Bank will assess the effects of the euro’s recent rally on consumer-price growth in its quarterly forecasts due in March, but recent moves have been rather limited, Executive Board member Piero Cipollone told Cyprus News Agency.
Officials consider the exchange rate as one element “to project inflation dynamics,” the Italian policymaker said, according to a transcript posted on the ECB’s website on Sunday. “We will see how the new projections match and the impact this will have.”
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At the same time, Cipollone highlighted that the ECB doesn’t have a specific target for the common currency, and that it’s been bunching around $1.17-$1.18 for almost a year now. “After the episode we saw a couple of weeks ago it is now back to levels seen in previous months,” Cipollone said.
ECB officials last week kept borrowing costs unchanged for a fifth meeting, with President Christine Lagarde repeating that they see themselves in a “good place,” and playing down the euro’s rise.
Greece’s Yannis Stournaras told Bloomberg TV on Friday that policymakers are monitoring the exchange rate but called the moves so far “not dramatic.” Most investors and economists don’t expect further cuts following the eight reductions to date.
However, euro-area inflation fell well below the ECB’s target in January, to 1.7%, and some policymakers fret about a more prolonged undershoot due to the strength of the common currency and headwinds to economic expansion. There’s “a real risk of lower-than-expected inflation,” Finland’s Olli Rehn said Friday, citing a stronger euro as one of the factors.
“We take into account the exchange rate as an input in our projections,” said Cipollone, who’s seen as one of the most dovish members of the Governing Council. “This is part of all the range of inputs that we take into account to project inflation dynamics.”
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