Italy: A Weaker Lira Won't Fuel Inflation
In "Another victim of the Asian flu" (Business Outlook, July 6), you say that the downside of an interest-rate cut by the Bank of Italy is a possible weakening of the lira against the currencies of its major trading partners, resulting in inflationary risk. However, things in Europe are not the way they used to be. The exchange rates at which the currencies of members of the European Monetary Union will be subsumed in the euro--on Jan. 1, 1999--were announced during the European Summit in the first weekend of May; current rates of the European Exchange Rate Mechanism were chosen. The currencies of Italy and its major European trading partners are already close to these central rates.
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