Lagarde Says ECB Watching Strong Euro Carefully

European Central Bank President Christine Lagarde said on Thursday that policymakers are watching the appreciation in the euro closely for any impact on prices, and reiterated that the bank stands ready to adjust all its tools when needed to support the fragile economic recovery in the euro area.

The Governing Council extensively discussed the implications of a strong euro in the latest policy meeting, Lagarde said in the post-decision press conference.

“We have to monitor carefully such a matter,” she said. However, policymakers did not see an immediate need to act on it, she added.

The ECB does not target the exchange rate, Lagarde reiterated.

Earlier on Thursday, the central bank left its key interest rates and its pandemic emergency purchase programme unchanged and reaffirmed its forward guidance.

“The incoming data since our last monetary policy meeting in July suggest a strong rebound in activity broadly in line with previous expectations, although the level of activity remains well below the levels prevailing before the coronavirus (COVID-19) pandemic,” Lagarde said.

The strength of the recovery remains surrounded by significant uncertainty, as it continues to be highly dependent on the future evolution of the pandemic and the success of containment policies, the ECB chief stressed.

Ample monetary stimulus remains necessary to support the economic recovery and to safeguard medium-term price stability and hence, the bank reconfirmed its accommodative monetary policy stance, Lagarde added.

Further, she said the monetary policy measures taken since early March are providing “crucial support” to underpin the euro area recovery and to safeguard medium-term price stability.

“The increases in coronavirus infection rates during the summer months constitute headwinds to the short-term outlook,” Lagarde said.

During the press conference, Lagarde unveiled the latest ECB staff macroeconomic projections that showed that the Eurozone growth forecast for this year was revised up to -8 percent from -8.7 percent predicted in June.

The growth projection for next year was lowered slightly to 5 percent from 5.2 percent and the outlook for 2022 was cut to 3.2 percent from 3.3 percent.

The inflation projection for this year was maintained at 0.3 percent. The projection for next year was raised to 1.0 percent from 0.8 percent and the outlook for 2022 was left unchanged at 1.3 percent.

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