According to Christine Lagarden, President of the European Central Bank (ECB), the recent strengthening of the euro is putting pressure on consumer prices, and the central bank is following this closely.
Lagarde commented on this at a press conference following the ECB interest rate meeting today.
He said the Governing Council discussed the strengthening of the euro, but stressed that the central bank does not have an exchange rate target.
Read also: The ECB kept its key interest rate unchanged at zero
Mr Lagarde reiterated that fiscal measures remain crucial and should be targeted and temporary.
He welcomed the EU's € 750 billion stimulus package to support the internal market and sustainable recovery.
According to the CEO, it is likely that the pandemic emergency purchase program PEPP will be fully implemented.
Financial figures in line with ECB expectations
Lagarde noted that macro figures point to a strong recovery in the euro area economy, which is broadly in line with the central bank's previous expectations.
He estimates that the situation in the industry has improved, while the pace of the service sector has slowed.
Lagarde stressed that uncertainty about the strength of the recovery is high and that a stimulative monetary policy is still needed.
He said that energy price developments and weak demand slowed inflation and that the ECB is closely monitoring economic figures and exchange rate developments.
According to Lagarde, growth risks are still low.
He said inflation is expected to remain negative in the coming months.
According to the CEO, inflation expectations are now at the same level as before the interest rate pandemic, but low.
The ECB raised its economic forecasts
The ECB has slightly improved its assessment of economic developments in the euro area this year.
Forecasts for the coming years, on the other hand, are slightly weaker than before.
The central bank now estimates that the eurozone's GDP will shrink by exactly 8% this year.
Next year, the economy would grow by 5.0 percent and in 2022 by 3.2 percent.
In its June forecast, the ECB forecasts that the euro area economy will contract by 8.7% this year, but grow by 5.2% next year and 3.3% in 2022.
The ECB estimates that consumer price inflation will be moderate.
Inflation is forecast to be 0.3 per cent this year, exactly 1 per cent next year and 1.3 per cent in 2022.
In June, the central bank estimated inflation to be 0.3 per cent this year, 0.8 per cent next year and 1.3 per cent in 2022.