A currency war is always a losing proposition, according to Benoit Coeuré, a member of the Executive Board of the European Central Bank. 

Mr Coeuré was responding to comments made by US Treasury Secretary Steven Mnuchin last week, who said he welcomed a weak dollar because it was good for US trade.

ECB will not target exchange rates Mr Coeuré said in an interview with RTÉ's Economic Correspondent Sean Whelan. 

"We have agreements that we should not target our exchange rates," he said. "We want to see rates that reflect economic and monetary conditions in different places. We are not going to change it."

Mr Coeuré said if that kind of volatility led to an unwarranted tightening of the ECB's monetary policy, "we would have to reassess and consider, but I think the most important message here is to keep to what we have agreed in the relevant fora, which is we're not targeting exchange rates".

The ECB executive board member is in Dublin at the European Financial Forum at Dublin Castle marking the third year of the Forum  bringing together international and Irish financial industry leaders from banking, finance, insurance, regulation, fintech and asset management to discuss the pressing issues surrounding European finance.


In terms of an impending Brexit, Mr Coeuré said the economic impact has been milder than expected so far, and that is mainly because the eurozone economy has been much stronger than expected. He said it has allowed our economies to weather the shock in a positive way.

He said it is very difficult to argue that Brexit in the long term will be a positive proposition. "It's going to be negative," he said. "I trust the political process to deliver a deal, whatever it looks like, which will minimise the cost, and for that we have to defer to the political process. The ECB is not doing the political negotiation. That's for leaders, and that's for Mr Barnier, and we hope it can reduce the cost." 

The ECB, he said, will have to prepare for adverse consequences in terms of the financial sector, financial services, and financial stability, that means that it has a duty to prepare for possible negative outcomes.

"Also in terms of economic management, and in particular for Ireland, that means that the economy has to be as strong as possible, as resilient as possible, meaning growth has been very robust but it could be more balanced.buffers have to be built for the future, including fiscal buffers."

Interest Rates

Mr Coeuré said the ECB has been clear that it expects interest rates to remain at the current level, very low, for an extended period of time, and well past the horizon for asset purchasers.

"Well past means well past. So that is not a discussion we are having, and we really expect interest rates to remain very low for an extended period of time."

The ECB does not set the market rates but does monitor them. Irish banks are charging their consumers the highest interest rates in the whole of euro area. Mr Coeure was asked what can the ECB do about it.

He said the ECB does set the policy rates which are short term rates decided by the ECB. He said the high rates reflects Irish banks still having some way to go to deal with the legacy of the crisis.

"They have been doing good work in terms of being more productive, more efficient," he said. "They are doing a good job to get rid of non-performing loans but that's a journey. It's a long journey. 

"The Central Bank of Ireland and the Irish Government have been very supportive, so there is a strategy there, but it will take time for Irish banks to come back to total normality when it comes to their legacy costs. That has to be reflected somewhere."