End is ‘nearing’ for ECB eurozone support — Bundesbank
FRANKFURT AM MAIN: The eurozone economy is robust enough for the European Central Bank to consider ending its current easy money policies, the head of Germany’s central bank said.
“Could it soon be time to take our foot off the gas? In my opinion, it’s getting closer,” Bundesbank president Jens Weidmann told the latest edition of the German weekly Die Zeit.
Weidmann is known to have repeatedly voted against the ECB’s mass bond- buying scheme, known as quantitative easing ( QE), under which it buys tens of billions of euros per month of government and corporate debt.
The purchases are designed to pump cash through the financial system and into the real economy, boosting growth and pushing inflation towards the central bank’s target of close to but below 2.0 per cent.
“I see bond purchases as a pure emergency tool, for times when there is a threat of deflation,” Weidmann said.
“I already thought deflation was unlikely in the past. Given the good prospects for the economy, it’s become even less likely.”
A spate of good news has encouraged eurozone observers in recent months, with unemployment falling to new post- crisis lows and inflation outpacing the ECB target in February before falling back again in March.
“Based on everything we know at the moment, the economic upturn in the eurozone is robust and will continue. Inflation will increase at the same time,” removing the justification for QE, Weidmann said.
But the ECB committed in December to continue buying bonds until the end of this year, albeit at a slower pace of 60 billion euros ( US$ 64 billion) rather than 80 billion euros per month from this month.
It also has no plans to raise its historically low interest rates until ‘ well past’ the end of its purchase programme – despite grumbling among savers in Germany that high inflation combined with low rates is eating into their nest eggs. — AFP