German Bundesbank President Jens Weidmann is seen after G-20 finance ministers and central banks governors family photo during the IMF/World Bank spring meeting in Washington, U.S., April 20, 2018. REUTERS/Yuri Gripas
May 19, 2018
FRANKFURT (Reuters) – Bundesbank President Jens Weidmann kept the door open for a run at the European Central Bank’s top job next year and argued that ECB policymakers should soon announce the end of lavish bond buys known as quantitative easing.
Speaking to German media group Funke, Weidmann said inflation was well on its way to meeting the ECB’s target, taking a more lenient view on price stability than ECB President Mario Draghi, and exposing a rift in the Governing Council in interpreting the ECB’s mandate.
With inflation slowly rising, ECB policymakers are now debating whether to end its 2.55 trillion euro bond purchase scheme after September, taking a step in phasing out unconventional monetary policy as the 19-member currency bloc enjoys its best economic boom in a decade.
“The ECB’s latest forecasts project inflation in the euro zone would be at 1.7 percent in 2020,” the media group quoted Weidmann as saying on Saturday. “In my view, that is in line with our definition of price stability.”
Draghi on the other hand has previously said that such a figure was “not really” in line with the ECB’s aim of keeping inflation at close to but below 2 percent, a figure never quantified but generally interpreted as 1.9 percent.
With Weidmann the most often mentioned candidate to succeed Draghi in late 2019, the differing views on the target could impact how quickly the ECB will move in the coming years in removing stimulus.
When asked if he was interested in Draghi’s job, Weidmann said the discussion was premature but all ECB Governing Council members could be in the running.
“I think every member of the ECB Governing Council should have the creative drive to be involved in monetary policy in a different role, too,” Weidmann said.
He added that wrapping up the bond buys this year was “plausible” given rapid growth and argued that the normalization of monetary policy should not be postponed unnecessarily.
“I do not want to predict a Governing Council decision, but I think it would be sensible to clarify this soon and to announce an end-date,” Weidmann said.
Markets now expect the bond buys to end in December after a short taper and see rates rising sometime around mid-2019, projections most policymakers say they are comfortable with.
(Reporting by Balazs Koranyi; Editing by Catherine Evans)
