ECB says further euro strengthening would trigger looser monetary policy

WASHINGTON Sat Apr 12, 2014 1:36pm EDT

European Central Bank (ECB) President Mario Draghi pauses during the monthly ECB news conference in Frankfurt April 3, 2014. REUTERS/Ralph Orlowski

European Central Bank (ECB) President Mario Draghi pauses during the monthly ECB news conference in Frankfurt April 3, 2014.

Credit: Reuters/Ralph Orlowski

WASHINGTON (Reuters) - A further strengthening of the euro exchange rate would require more loosening in the European Central Bank's monetary policy to keep the overall policy stance as accommodative as it is now, ECB President Mario Draghi said on Saturday.

Draghi said that euro appreciation over the last year was an important factor in bringing euro zone inflation down to its current low levels, accounting for 0.4-0.5 percentage point of decline in the annual rate, which stood at 0.5 percent year-on-year in March.

"I have always said that the exchange rate is not a policy target, but it is important for price stability and growth. And now, what has happened over the last few months is that is has become more and more important for price stability," Draghi said at a news conference.

"So the strengthening of the exchange rate would require further monetary policy accommodation. If you want policy to remain accommodative as now, a further strengthening of the exchange rate would require further stimulus," he said.

(Reporting by Jan Strupczewski and Krista Hughes; Editing by Paul Simao)

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