Wednesday 25 April 2018

Bundesbank backs ECB low interest rate

Maio Draghi: warning
Maio Draghi: warning

Stefan Riecher

The European Central Bank's record low interest rate policy stance is appropriate considering the weak economy and inflation expectations, the Bundesbank said yesterday.

"Given expected low inflation rates over the medium term and weak economic developments, an expansive bias in monetary policy in the euro area is currently justified," Germany's central bank said in a regular monthly report.

"At the same time, it is essential to keep an eye on the medium-term risks of very low interest rates with regard to a forward-looking stabilisation policy."

The European Central Bank this month lowered its benchmark rate to a record low of 0.25pc and ECB president Mario Draghi warned the 17-nation economy may face a prolonged period of low inflation.

The rate cut was opposed by about one quarter of the 23-member Governing Council, among them Bundesbank head Jens Weidmann, and ECB Executive Board member Joerg Asmussen.

"The accommodative monetary policy stance will further support the gradual recovery of economic activity that has been observed since this spring," the Bundesbank said.

Gross domestic product in Germany expanded 0.3pc.

"Germany's economy is on a solid growth path," the Bundesbank said.

Irish Independent

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