Saturday 21 April 2018

Bundesbank boss warns on political pressure to keep QE

Banking chief Jens Weidmann
Banking chief Jens Weidmann

Catherine Bosley

European Central Bank (ECB) Governing Council member Jens Weidmann has highlighted the risks of continuing extraordinarily expansive monetary policy for too long.

Sovereign bond purchases muddy the waters between monetary and fiscal policy, "this can lead to political pressure being exerted on the euro-system to maintain the very accommodative monetary policy for longer than appropriate from a price stability standpoint," Weidmann, pictured, said on Wednesday in Frankfurt. "After all, in the context of these asset purchases, changes in monetary policy impact more directly on governments' funding costs than interest rate moves."

The comments by the Bundesbank president, who has a track record of warning of the danger of buying government bonds to boost inflation, come just days after the ECB dropped guidance in its statement that rates might fall further, a sign it's moving closer to an exit from its €2.3 trillion asset-purchase program.

Weidmann was just one of a number of ECB policy makers speaking on Wednesday. Vice President Vitor Constancio discussed bank regulation in Rome, while Dutch central bank chief Klaas Knot and Italy's Ignazio Visco were also among the speakers.(Bloomberg)

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