Update Coeure: Euro Source of Uncertainty; Must be Monitored

--Adds Quotes in Final Paragraphs 

By Jack Duffy

     PARIS (MNI) - The shock caused by a strongly rising euro exchange rate can

lead to an unwarranted tightening of monetary conditions and needs to be

monitored, European Central Bank Executive Board member Benoit Coeure said

Monday.

     Speaking in Frankfurt, Coeure said the Eurozone's current expansion is

being driven largely by domestic demand so the euro's rise may have less of an

impact than in the past.

     But "exogenous shocks to the exchange rate, if persistent, can lead to an

unwarranted tightening of financial conditions with undesirable consequences for

the inflation outlook," Coeure said.

     "Against this background, the recent volatility in the exchange rate

represents a source of uncertainty which requires monitoring," he said.

     Coeure also said the central bank's medium-term horizon for price stability

"is likely to be longer given the persistence of subdued inflationary

pressures."

     "This means that, compared with past demand shocks, policy will remain more

accommodative for longer," Coeure said. 

--MNI Paris Bureau; tel: +33 1-42-71-55-41; email: jack.duffy@marketnews.com

[TOPICS: M$X$$$,M$$EC$]