ECB's Lagarde: Euro Fall Has Added to Inflation Pressures

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ECB's Lagarde: Euro Fall Has Added to Inflation Pressures

By Geoffrey Smith 

Investing.com -- The European Central Bank issued a rare warning about the euro's sliding foreign exchange rate on Thursday, adding to the global unease among policy-makers at the dollar's strength. 

 
"The depreciation of the euro has also added to inflationary pressures," ECB President Christine Lagarde said in the introductory statement to her press conference. The bank had earlier announced its biggest interest rate hike in the 23 years of its existence, raising its key rates by 0.75% each.

The ECB has traditionally said that it doesn't target any specific exchange rate. However, the sharp slide in the euro this year has added substantially to the cost of the Eurozone's energy imports, which are almost all priced in dollars. 
 
The euro has fallen over 12% against the dollar since the start of the year. It was unchanged after Lagarde's comments at $1.0003. That's largely because the earlier, and bigger interest rate steps by the Federal Reserve have widened the differential between interest rates on the dollar and its rivals. 
 
Lagarde's comments come on the same day as Japanese government officials warned about the size and speed of the yen's depreciation this year.  The dollar also hit a 47-year high high against sterling overnight, a reflection of the same energy-driven balance of payments problems as those facing the euro.

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