Any move by the European Central Bank to raise rates now, thereby deviating from the global trend, could increase the euro exchange rate and hurt the economic recovery, ECB Governing Council Member Ewald Nowotny warned on Friday.
In a speech in Vienna, Nowotny said any unilateral rise of interest rates in the euro area would lead to a further increase in the euro exchange rate. A stronger euro would adversely affect economic growth and may even lead to deflation, the rate-setter added.
Nowotny, who also heads Austria's central bank, does not see any inflationary pressure in the Eurozone. On the contrary, inflation seems to be strongly declining, presently, he said.
If the ECB spots any threat to price stability from rising inflation, it would promptly react, the policymaker said.
He also noted that the fears of a break-up of the Eurozone are completely gone now. Further, he expects all Eurozone countries to grow in 2014.
Regarding the deal struck in the U.S. to raise the debt ceiling, Nowotny said uncertainty remains as to its sustainability.
Despite the recent U.S. crisis, the dollar will remain the world's reserve currency for a long time, he added.
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