Volatility in foreign exchange rates increases uncertainty in the economy, European Central bank Governing Council member Erkki Liikanen said, and added the U.S. strong dollar policy is well-founded.
"Strong swings and uncontrolled movements in foreign exchange rates are factors which increase uncertainty in the economy," Liikanen said in a speech given on Saturday, but posted on the Bank of Finland website on Monday. "Uncertainty about foreign exchange rates is undesirable, because it does not help favourable economic development or stability of the financial system." "Thus, it is well-founded that the economic policy in the United States is based on the strong dollar," Liikanen added. Liikanen also said strong growth in government debt in years to come would limit the space for monetary policy action, but said fiscal stimulus was required at the moment. Global growth was likely to be slower after the crisis than it was before it, Liikanen also said.