ECB cuts European inflation forecasts

FRANKFURT, Germany – European Central Bank head Mario Draghi says recent exchange rate volatility “requires monitoring” and is a source of “uncertainty.”

Markets had been waiting to see whether Draghi would try to talk the euro down after its 14 percent rise this year to $1.20

A stronger euro can hurt eurozone exports and lower inflation which the ECB is trying to raise through its $72 billion per month in bond purchases.

The ECB also lowered its forecasts for inflation – to 1.2 percent next year from 1.3 percent previously and to 1.5 percent in 2019 from 1.6 percent. However, it raised its economic growth forecast this year to 2.2 percent from 1.9 percent previously.

Draghi’s statement came after the bank’s 25-member governing council decided to leave interest rates and the bond purchases unchanged. They are slated to run through the end of the year, and longer if necessary. Markets expect they will be phased out next yewar as the economy improves.