Tuesday 17 October 2017

ECB 'has started debate on guidance'

Jens Weidmann, president of the Deutsche Bundesbank
Jens Weidmann, president of the Deutsche Bundesbank

Piotr Skolimowski and Alessandro Speciale

The European Central Bank is starting to debate whether to reflect improving economic prospects in its policy guidance, Bundesbank President Jens Weidmann has said.

The current guidance says the central bank will keep interest rates at current or lower levels well past the end of an asset purchase programme due to run until at least the end of this year.

Speaking before the ECB begins a self-imposed quiet period ahead of next week's monetary policy meeting, Mr Weidmann said the strengthening recovery makes it increasingly likely that the rise in the inflation rate isn't "just a flash in the pan". Inflation would still accelerate more than in the previous years even if some of the stimulus were removed, he said, adding the ECB should consider the impact of its policies on bank profitability.

"In my view, the current economic outlook together with the improvement in the balance of risks suggests that the governing council is beginning to discuss whether and when it will be time to adjust our forward guidance," Mr Weidmann said in a speech in Germany.

Mr Weidmann is a critic of the ECB's loose monetary policy. The comments set the stage for heated discussions when officials gather in Tallinn on June 8. President Mario Draghi has downplayed expectations he'll change tack on policy next week. (Bloomberg)

Irish Independent

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