FRANKFURT, Oct 22 - European Central Bank Governing Council Member Matti Vanhala was quoted as saying on Wednesday that the strong euro was not the main risk to euro zone growth and a return of confidence was essential. "I don't think the euro is the main risk," to growth, Vanhala told Bloomberg News in an interview posted on its website. "Much more important is whether confidence in economic policies can return," he was also quoted as saying. The corporate sector viewed the euro's recent appreciation as a burden, but Vanhala said that its movements were within normal bounds. "The kind of movements we have seen from the euro should be regarded as perfectly normal in a global set-up where the exchange rate is a safety valve with an element of flexibility," he added.
The euro is currently trading just below $1.17, within reach of its all-time highs above $1.19 reached in May and June. Bloomberg also reported that Vanhala, who is also the Governor of the Finnish central bank, said that euro zone interest rates are appropriate, echoing comments by other central bank officials in recent weeks. The ECB last lowered interest rates in June, bringing its benchmark refi rate down to a record low of 2.00 percent. Vanhala repeated the ECB's scenario for a gradual recovery in the 12-nation euro zone economy that will pick up speed next year. "The likelihood is that we will get a modest, gradual rise in the GDP growth rate," he said. But recent signs from the euro zone economy had not been enough to give the all-clear on the recovery, which would initially see a "wobbly turn for the better", Vanhala said. Vanhala also repeated the central bank's outlook that inflation would drop below the ECB's two percent tolerance threshold next year, but said oil prices were a risk.//