Account of January meeting also show communications differences on QE
A man wearing a monkey costume passes in front of the old European Central Bank building in Frankfurt, Germany Photograph: EPA
Euro zone concerns over the weakness of the dollar were laid bare in a set of European Central Bank minutes that highlighted fears the Trump administration was deliberately trying to engage in currency wars.
The account of the ECB’s January monetary policy meeting also reveals that its hawkish members pushed for a change in the bank’s communications, arguing economic conditions were now strong enough to drop a commitment to boost the quantitative easing programme in the event of a slowdown.
Mario Draghi, ECB president, last month hit out at US treasury secretary Steven Mnuchin’s claim that a weak dollar was good for the American economy. Mr Draghi said Washington needed to uphold the rules of the international monetary system, which forbid nations from deliberately devaluing their currencies.
Mr Mnuchin’s remarks were seen as a signal that the US could ditch its strong dollar policy – which could lower euro zone exports and make it harder for the ECB to hit its inflation target.
Mr Mnuchin later said his comments were “completely consistent with what I’ve said before” and that he had merely made a “factual statement” that a weaker dollar would help the US on trade in the short term. President Donald Trump has also since reaffirmed the strong dollar policy.
The accounts of the ECB meeting on January 24th -25th, published on Thursday, show Mr Draghi’s fears were widely shared among the bank’s decision makers. “Concerns were…expressed about recent statements in the international arena about exchange rate developments and, more broadly, the overall state of international relations,” the account said.
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