European Central Bank chief Mario Draghi brushes off Donald Trump charge of currency manipulation

Frankfurt Am Main, AFP | Updated : 19 June 2019, 07:36 AM
Eurozone policymakers had already discussed potential rate cuts in early June, but Draghi’s Tuesday remarks were the first to catch markets’ full attention. (File photo)
Eurozone policymakers had already discussed potential rate cuts in early June, but Draghi’s Tuesday remarks were the first to catch markets’ full attention. (File photo)

European Central Bank chief Mario Draghi said Tuesday that the institution “doesn’t target the exchange rate”, shrugging off an allegation of currency manipulation from US President Donald Trump. “We have our remit. We have our mandate. Our mandate is price stability” or inflation just below two percent, Draghi told a central banking conference in Sintra, Portugal.

“We are ready to use all the instruments that are ready to fulfil this mandate, and we don’t target the exchange rate,” he added.

Draghi’s statement that weak economic growth and sluggish inflation could prompt the ECB to slash further rates already at historic lows had earlier sparked Trump’s ire.

“Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA,” Trump said via Twitter.

“They have been getting away with this for years, along with China and others,” he added.

Draghi said in a speech that “further cuts in policy interest rates... remain part of our tools” as the bank looks to juice growth and inflation.

Eurozone policymakers had already discussed potential rate cuts in early June, but Draghi’s Tuesday remarks were the first to catch markets’ full attention.

That was in part because he said the central bank was ready to move “in the absence of improvement” rather than if economic conditions worsen, lowering the threshold for action.

Germany’s DAX index of blue-chip shares leapt into the black from negative territory—adding 2.1 percent around 5:15 pm (1515 GMT) -- and pushed the euro down as much as 0.3 per cent against the dollar, to USD 1.12, before rebounding slightly.

“German DAX way up due to stimulus remarks from Mario Draghi. Very unfair to the United States!” Trump tweeted.

Many of the DAX companies like carmaker BMW or chemical company Bayer in fact have a massive US presence.

And 10-year government bond yields in France briefly dipped into negative territory for the first time ever—joining Germany, the Netherlands and Austria in the club of countries investors pay to lend them money—before ticking up to 0.01 per cent mid-afternoon.

Draghi’s speech was “the clearest indication yet that the bank will cut interest rates and relaunch its asset purchase programme in the coming months if... measures of inflation and inflation expectations remain very low,” said Andrew Kenningham of Capital Economics. 

First Published: Wednesday, June 19, 2019 07:31 AM
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