February 22, 2018 / 11:09 PM / in 6 months

Strong euro a "point of attention" for ECB - Smets

BRUSSELS (Reuters) - The strong euro currency is a “point of attention” for policymakers at the European Central Bank, Belgium’s ECB Governing Council member Jan Smets said.

The German Central Bank (Bundesbank) presents the new 50 euro banknote at its headquarters in Frankfurt, Germany, March 16, 2017. REUTERS/Kai Pfaffenbach

The single European currency’s value increased by some 15 percent against the dollar in 2017 and has since jumped by another 3 percent, lowering the cost of imports and therefore inflation in the 19 countries sharing the euro.

“Foreign exchange rates are a point of attention. The volatility on the foreign exchange markets remains a point of attention,” Smets told a news conference in Brussels in remarks embargoed until Friday.

Smets, governor of Belgium’s central bank, said that as long as the stronger currency was supported by economic fundamentals, it did not pose a problem.

“Only if, as we said last time after our monetary policy meeting in Frankfurt, this volatility becomes excessive, when certain levels are breached because of overshooting, because of a devaluation policy to increase competitiveness, can problems occur,” he added.

Smets noted the strong euro did not help the ECB in reaching its target of bringing annual inflation close to but below 2 percent. Euro zone inflation was 1.3 percent in January.

“A priori the (inflation) target is not aided by the appreciation of the euro,” Smets said.

Reporting by Robert-Jan Bartunek; editing by Philip Blenkinsop

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