European Central Bank policymakers were worried the U.S. might be launching a currency war after a Trump administration official expressed support for a weak dollar.
Members of the central bank's governing council underscored the importance of countries sticking to international agreements requiring them to avoid devaluing their currencies to gain competitive advantages, according to minutes of the January meeting released Feb. 22.
"Concerns were ... expressed about recent statements in the international arena about exchange rate developments and, more broadly, the overall state of international relations," the minutes note. "The importance of adhering to agreed statements on the exchange rate was emphasized."
Last month, ECB President Mario Draghi criticized U.S. Secretary of the Treasury Steven Mnuchin, without using his name, after Mnuchin said a weak dollar was good for the American economy. Mnuchin later said his comments were taken out of context and President Donald Trump reaffirmed U.S. support for a strong dollar.
The euro climbed to more than $1.25 after the ECB's January meeting. It is now at $1.23.
"The recent volatility in the exchange rate of the euro was a source of uncertainty which required monitoring with regard to its possible implications for the medium-term outlook for price stability," the minutes noted.
Participants in the ECB meeting also said that the eurozone's economic expansion continued at a "robust pace," though inflation remained subdued. Still, the council said, they expected improving economic conditions to push inflation closer to the bank's 2% target eventually. They also expressed support for the pace of monthly asset purchases, which is now €30 billion, and which are intended to run through September 2018, or beyond, "and in any case until the Governing Council saw a sustained adjustment in the path of inflation consistent with its inflation aim."
A policy split about how to approach the continuation of quantitative easing was evident in the minutes. Some of the more hawkish members of the council said they preferred to drop the "easing bias" in quantitative easing from their communications "as a tangible reflection of reinforced confidence in a sustained adjustment of the path of inflation."
It was decided, however, that such an approach would be premature "and not yet justified by the stronger confidence."