Does the European Central Bank Have Big Changes in Store for Interest, Exchange Rates?

NEW YORK (TheStreet) -- Big news for international economic policy watchers: the European Central Bank kept interest rates unchanged at its monthly meeting which concluded earlier today -- but there was also a big hint that something will happen at the June meeting.

The European economy may no longer be in crisis, but growth rates have been lower than the U.S., and unemployment rates much higher. While the Federal Reserve has been tapering over recent months, the debate in Europe has been whether to unleash further policy stimulus. Such an action has been gaining political support, with the French Prime Minister calling for both further economic stimulus efforts and a lower value of the euro.

The general perception was that the independent European Central Bank, with its dogged focus on maintaining a low inflation rate, was highly reluctant to either implement greater stimulus or explicitly weaken the strong euro.

However, fifteen minutes into May's ECB press conference, President Mario Draghi said something that caught market watchers by surprise:

"We had a discussion on the exchange rate... not a policy target but very important.... The strengthening of the exchange rate in the light of low inflation is of serious concern to the Council."

He then followed this up by saying that the ECB was "comfortable with acting next time" -- a reference to the potential announcement of new stimulus measures for the European economy.

To put this into context, these two announcements in unison would be like Janet Yellen telling the world's media that not only was she going to stop tapering but she also though the dollar was a bit too high.

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