Noyer warns of currency volatility
“Excessive turbulence and volatility between currencies and on financial markets are elements that are negative for global growth,” Noyer, who’s also Bank of France governor, said on French radio station BFM.
“We wish for maximum stability because it’s one of the ingredients for confidence, and healthy and durable growth.”
The 18-member ECB council yesterday left interest rates for the dozen euro nations unchanged at 2%. Two days earlier, Europe’s single currency rose to a record high of $1.2812, according to EBS prices, making the region’s exports more expensive abroad.
The euro has gained 22% against the dollar in the past 12 months.
Politicians including Belgian Prime Minister Guy Verhofstadt and German Economics and Labour Minister Wolfgang Clement had called for lower interest rates to stem the currency’s advance.
“One of our essential aims is to avoid caving in to pressure,” said Noyer, who was ECB vice president between 1998 and 2002. Nor should the ECB “overreact’ to pressures by refusing to make the right decisions just to assert its independence, he said.
The euro’s 5% appreciation against the dollar since the ECB’s December 4 meeting “played negatively” for Europe’s exports, the Bank of France governor told BFM. At the same time, global demand for European goods and services accelerated, leaving the overall situation “broadly unchanged.”
ECB president Jean-Claude Trichet said yesterday the damage caused to the region’s exporters by the euro’s appreciation is not yet enough to cause the bank to change its outlook for an economic recovery this year.
The ECB’s benchmark lending rate is the lowest in any of the nations sharing the euro in almost six decades. For France, borrowing costs are the lowest since 1946.
Long-term interest rates are also “extremely low,” Noyer said. “We have the best financial conditions possible, which is underpinning growth.”
