Germany: European Central Bank's Haemaelaeinen Says Weak Euro `Misaligned,' `Cause for Concern'

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10/07 08:18

Germany: European Central Bank's Haemaelaeinen Says Weak Euro `Misaligned,' `Cause for Concern'

By Iain Rogers

Hanover, Germany, Oct. 7 (Bloomberg) -- The euro's current exchange rate is a ``cause for concern'' and ``represents a misalignment,'' a member of the European Central Bank's executive board said.

The single currency's 25 percent weakening against the U.S. dollar since it was introduced at the beginning of last year ``has been an important factor, among others'' in decisions by the ECB to raise rates over the past year, ECB board member Sirkka Haemaelaeinen told the fall meeting of the German-Finnish chamber of commerce in Hanover, Germany.

``We are concerned about the potential implications of an excessively weak euro exchange rate for the world economy,'' Haemaelaeinen said, in the text of her speech made available on the ECB's Web site. ``We believe that the present exchange rate does not properly reflect the fundamental strengths of the euro area economy.''

The ECB raised its benchmark lending rate -- the amount charged on two-week loans to commercial banks -- to 4.75 percent Thursday in an attempt to boost the euro and prevent its slide from stoking inflation. Some companies have said they're worried a combination of higher borrowing and oil costs will crimp earnings and stifle economic growth.

The ECB has raised its benchmark rate by a total of 2.25 percentage points in the last year.

The euro declined following Thursday's rate increase amid concern over a possible slowdown in the economy. ECB policy makers, however, insist rates are still below levels that might lead to slower growth, suggesting the central bank sees room to raise borrowing costs further. At the close of trading Friday the euro was at 86.80 U.S. cents.

``The ECB's monetary policy interest rates remain low from a historical and international perspective,'' Haemaelaeinen said. The ``sharp increase in oil prices,'' which have tripled since the start of 1999, was also ``an important factor'' in the central bank's rate decisions, she said.

The ECB's rate-setting governing council next meets Oct. 19.

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=blk&bt=ad_position1_topfin&middle=ad_frame2_topfin&s=AOd8UsxXTRUNCJ3Mg

-- Carl Jenkins (Somewherepress@aol.com), October 07, 2000

Answers

Misalignment? Is this a statesman's way of trying to sound like a statesman?

-- Loner (loner@bigfoot.com), October 07, 2000.

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