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Trade war could have negative impact on exchange rates: ECB's Nowotny

FILE PHOTO - European Central Bank (ECB) Governing Council member and OeNB governor Ewald Nowotny addresses a news conference in Vienna, Austria, June 9, 2017. REUTERS/Leonhard Foeger

LONDON (Reuters) - A global trade war could have widespread negative effects including in currency markets, one of the European Central Bank’s top policymakers said on Tuesday.

“Trade wars have negative effects for all involved,” Austria’s central bank head, Ewald Nowotny, said at a SUERF economics conference.

“The direct effects might be on the exchange rate side but this is difficult to see or to forecast because today we have so many linkages, we have long production chains... It might have negative effects on financial stability, but effects on monetary policy are not very clear.”

Nowotny added that the ECB did not have an exchange rate target and that he did not want the central bank to make any changes to its goal of keeping inflation just under 2 percent over the medium term.

Reporting by Marc Jones and Helen Reid