Weidmann Says ECB Still Eyes Normalization Despite Growth Dent
(Bloomberg) -- Withdrawing crisis-era stimulus remains the European Central Bank’s baseline plan despite recent economic weakness across the euro area, according to Jens Weidmann.
The German Governing Council member argued that the outlook for his own economy -- Europe’s largest -- is characterized by “a growth dent that’s extending into the current year, and a growth rate that might be well below potential growth, but still positive.”
“What interests us as central bankers is the medium-term inflation outlook, and the term ‘dent’ implies that at some point it will turn up again,” he told reporters in Frankfurt Wednesday.
He added that he sees no urgency to adjust the ECB’s communication on interest rates, even as investors see a first hike coming later than what’s suggested by the ECB’s current guidance.
While a point will come when the pledge to keep borrowing costs on hold at least through the summer “will be out of date,” he said there’s “no acute need to act at the moment because markets have understood what we’re trying to say and are reacting accordingly.”
Asked whether he sees a case for the ECB to renew long-term funding to banks, Weidmann pointed to the Governing Council’s next policy meeting on March 7 as a key moment for assessing how current operations affect policy.
“The question over whether it’s more difficult for financial institutions to meet regulatory demands -- that’s something where our monetary policy decisions shouldn’t play a role unless it has an effect on inflation developments,” Weidmann said. The discussion “must focus on what effects the expiring operations will have on reaching our monetary goals.”
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