ECB’s de Guindos says exchange rate is fundamental for inflation

FILE PHOTO: European Union finance ministers meet for monthly talks in Brussels
FILE PHOTO: European Central Bank (ECB) Vice-President Luis de Guindos attends an European Union finance ministers meeting in Brussels, Belgium January 21, 2020. REUTERS/Johanna Geron/File Photo

September 17, 2020

FRANKFURT (Reuters) – The euro’s exchange rate is a “fundamental” determinant of euro zone inflation, European Central Bank vice-president Luis de Guindos said on Thursday, joining a number of ECB policymakers warning about the strength of the single currency.

“The exchange is a fundamental economic variable which affects imports, exports, imported inflation or deflation,” de Guindos said during a webinar.

“A relatively brisk and intense fluctuation in the exchange rate affects inflation expectations and the conditions that determine inflation.”

He added the ECB could not be happy with its own forecast for a 1.3% inflation rate in 2022 but he downplayed fears of deflation.

(Reporting By Francesco Canepa; Editing by Balazs Koranyi)