January 25, 2018 / 1:46 PM / a year ago

ECB's Draghi says euro strength is a source of uncertainty

FRANKFURT, Jan 25 (Reuters) - The euro’s recent rise on foreign exchange markets is a source of uncertainty for the euro zone’s inflation outlook and European Central Bank policymakers, ECB President Mario Draghi said on Thursday.

The common currency has rallied 5 percent against the dollar in recent weeks, complicating the ECB’s path out of its massive stimulus programme by threatening to curb a tepid recovery in euro zone inflation.

“The recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability,” Draghi told a news conference following the ECB’s regular policy meeting.

A stronger currency makes exports from the bloc dearer and imports cheaper, undoing some of the ECB’s multi-trillion euro efforts to stimulate price growth in the euro zone.

The rally in the euro against the dollar has been given fresh momentum this week by U.S. Treasury Secretary Steven Mnuchin, who welcomed a weakening of the greenback.

Draghi had said in a letter published on Wednesday that exchange rate shifts were a side effect, not the objective, of ECB policy.

Reporting By Francesco Canepa; Editing by Catherine Evans

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