FRANKFURT, Germany (AP) – A strengthening euro is complicating the European Central Bank’s efforts to scale back and then exit from its monetary stimulus efforts.
For weeks, financial investors had been expecting the bank and its president, Mario Draghi, to give some signal after their policy meeting on Thursday about when they expect to start winding down the stimulus program.
But a recent surge in the euro, which can hurt exports and weigh on the economy, and the fact that inflation remains below the 2 percent target have dampened those expectations. Analysts are now wondering whether Draghi will reveal very much or anything at all in terms of concrete guidance for when to start phasing out the stimulus – for fear of driving the euro even higher.
The stimulus program is credited with helping turn around the 19-country eurozone economy, which is now growing at a brisk pace. So investors are keen to know when the program will start being wound down, and how quickly. In the past, talk of tapering off stimulus has caused stocks to fall and the euro to rise.
The euro has gained 13 percent in value this year against the dollar, to $1.19, and briefly traded above $1.20 last week. The exchange rate jumped after Draghi said in June that the ECB would ease off its stimulus in tandem with a recovering economy.