European Central Bank Faces Hurdle in Cutting Stimulus: A Weak Dollar
So while analysts had predicted that a decision to “taper” stimulus would be announced at the meeting of the central bank’s Governing Council on Thursday, they now think
that Mario Draghi, the central bank’s president, will wait until late October at the earliest.
There’s not much Mr. Draghi can do about the weak dollar, which analysts say reflects pessimism about the ability of President Trump and Congress to agree on legislation
that many economists believe would help goose growth in the United States, such as infrastructure programs or corporate tax reform.
Mr. Draghi could express concern about currency rates when he holds a news conference Thursday, the kind of statement
that would be seen by analysts and traders as an implied threat to pursue policies that would weaken the euro, for example by extending the stimulus measures.
For one, when the euro rises against the dollar, European exports become more expensive — not only in the United States
but also in other countries, like China, whose currencies are linked with the dollar.
A robust euro also undercuts the bank’s efforts to jolt inflation back to the official target of 2 percent, a level considered healthy for growth.
Since early 2015, the European Central Bank has been flooding the 19-nation eurozone with cash to lower interest rates, stimulate growth
and raise inflation from levels considered to be dangerously low.