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ECB's Coeure Says Persistent Shocks To Exchange Rate Can Hurt Inflation Outlook

Persistent gains in the euro due to external factors can hurt the outlook for inflation, while an economic improvement could offset the negative impact of a strong currency arising from expectations of tighter policy stance in future, European Central Bank Executive Board member Benoit Coeure said Monday.

"With policy being effective in boosting growth, any disinflationary effect of a stronger currency arising from expectations of a tighter future monetary policy stance might be mitigated, or offset, by the ensuing improvement in the economic outlook," Coeure said in a speech in Frankfurt.

"However, exogenous shocks to the exchange rate, if persistent, can lead to an unwarranted tightening of financial conditions with undesirable consequences for the inflation outlook."

by RTT Staff Writer

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