While the Frankfurt-based central bank doesn’t have an exchange rate target, “the level of the euro is important in our monetary policy making,” Coeuré said in an interview with Bloomberg TV yesterday.
“It impacts on inflation, and we have an inflation mandate. So the stronger the euro, the more need for monetary accommodation.”
ECB president Mario Draghi said last week that the 24-member governing council is unanimous in its willingness to deploy unconventional measures to fight the threat of deflation. Such options include an asset-purchase programme, more long-term loans to banks or charging institutions for depositing money with the central bank.
“We have a mandate to bring inflation back to close to 2%,” Coeuré said.
“We are very aware of our duty under our mandate, and we’ve been clear in our meeting last week that unanimously the governing council was ready to consider more measures, including also non-conventional measures to address low inflation if needed.”
The inflation rate in the 18-nation eurozone dropped to 0.5% in March, the lowest level in more than four years.
While the low inflation rate is a reason for concern, European policy makers including Eurogroup chairman Jeroen Dijsselbloem insist that the currency bloc will be able to avoid a Japan-style deflation.
“It’s normal to have low inflation,” said Dijsselbloem.
“The question is: Will it be for a prolonged period of time, will it be in a number of countries,” Dijsselbloem said.
“I don’t see that. I follow what the ECB analysis says, I don’t think that’s going to happen.”
Coeuré agreed. “Let me be clear that Europe is not Japan,” he said.
“It’s not only about inflation being low or negative, it’s about people postponing their decisions, people postponing their investments, their consumption decisions, and this we don’t see.”