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The recent decline in the euro’s value against the dollar was certainly a factor behind the European Central Bank’s shift to a quicker removal of net asset purchases going forward, according to Theodore Pelagidis, a Deputy Governor at the Bank of Greece.
Pelagidis pointed to the “need to provide some support to the euro” as one factor for the Governing Council’s shift, with the “Ukraine random shock which brought an unexpected supply side, sky-high, ‘cost inflation’”, another.
The clearly worsening inflation outlook was undeniably a reason for the hawkish tone, Pelagidis added, but there were certainly other reasons for the shift in stance, he said
“The growth - inflation balance has clearly worsened beyond any forecasts so that produced a hawkish tone,” he said in emailed comments to MNI
Other Eurosystem sources with knowledge of the meeting, who preferred not to be named, confirmed the euro was among the relevant issues discussed.
Since the ECB’s February meeting, the euro has fallen from above eur1.14 against the U.S. dollar to below 1.0855 on March 7, before recovering somewhat to 1.100 on Friday.
Source: Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.