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The euro reached a one-week high against the dollar after the European Central Bank Executive Board member Lorenzo Bini Smaghi said the bank may need to raise interest rates as global inflation pressures mount.
The shared currency was poised for the first weekly advance in almost a month.
Group of 20 finance ministers and central bankers opened a two-day summit in Paris today in an effort to agree on a common approach to global economic imbalances.
“As the economy gradually recovers and global inflationary pressures arise, the degree of accommodation of monetary policy has to be monitored and, if needed, corrected,” Bini Smaghi said.
The ECB policy maker’s comments suggested officials are becoming more concerned about inflation, which has already breached the central bank’s 2% limit and is at the fastest pace in more than two years. Companies face stronger input-price pressures, and forecasters in an ECB survey this month raised longer-term inflation expectations to 2%.
The greenback has declined this week as minutes from the Federal Reserve’s January meeting showed the central bank was dissatisfied with job growth and would continue monetary stimulus. Policy makers under Fed Chairman Ben S. Bernanke have held the benchmark interest rate at zero to 0.25% since December 2008, and have said it will remain low for “an extended period.”
The ECB has kept its key rate at 1% since May 2009, helping the euro region haul itself out of recession.
Sterling reached a two-week high against the dollar after data showed U.K. retail sales surged 1.9% last month, almost four times the amount forecast by economists.
Pressure on the Bank of England to raise its key rate from a record low of 0.5% increased this week after a Feb. 15 report showed inflation accelerated to double the central bank’s 2% target.
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