On Tuesday, US President Donald Trump rebuked European Central Bank President Mario Draghi for hinting at the route of printing money to boost the economy. This infusion of more monetary stimulus would weaken the euro with regard to the dollar.
ECB’s Draghi said in a speech that if economic conditions in Europe remained low, then he turn towards boosting monetary stimulus in order to combat inflation. This boosting implies cuts in interest rate or the revival of a quantitative easing program that involves creating new money to buy assets such as government bonds.
“In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required,” Draghi said in Sintra, Portugal.
This move received a bitter reaction from Trump who took to social media to point out the ‘unfair’ move as the weaker euro becomes, “easier” it is for Europe to “compete against the USA.” Trump has frequently criticised the Fed for hampering economic growth in the US.
Trump said on Twitter, hours after Draghi’s speech, “Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.”
After tariff war with China, US got tangled in currency war with Europe. A currency war is the one where countries competitively trim down the value of their currency in order to gain an advantage on trade, especially exports.
Draghi commented over Trump’s tweet saying that the ECB is focused on its mandate of keeping inflation just below 2% and the plan is take to save Europe, not to plot against U.S. Draghi said, “We don’t target the exchange rate.”