ECB’s Weidmann sees no new stimulus need amid price pressure

Weidmann skirted questions over whether he might become ECB president in November. (Bloomberg pic)

FRANKFURT: European Central Bank policy maker Jens Weidmann said he sees signs of price pressures and signalled he’s opposed to adding any extra stimulus for the euro zone.

The ECB is currently preparing updated economic projections after a raft of data and falling inflation expectations that has cast doubt over a rebound in the second half of the year. The Governing Council may have to consider responding with measures to boost the outlook when it meets on June 6.

“Even if economic momentum is currently slowing, that’s happening from a very high level – in Germany, for example, capacity is overstretched,” Weidmann, the head of Germany’s Bundesbank and a contender to succeed ECB chief Mario Draghi this year, said in Frankfurt. “Price pressures are still there, and it’s not a situation in which we need to react with any economic programs or further stimulus. It’s still a favourable economic situation.”

Germany was a prime driver of euro-zone growth in the first half of last year, as its largest economy and boasting record-low unemployment that boosted spending. Then the nation flirted with recession in the second half amid trouble at its carmakers and rising trade tensions that threatened exports.

The government predicts GDP growth of just 0.5% this year, and business confidence in May was the weakest since 2014. Yet there are signs of resilience. Growth bounced back in the first quarter as household consumption jumped by the most in almost eight years.

The International Monetary Fund said this month that Germany, which runs a fiscal and current-account surplus, should cut taxes and upgrade its digital infrastructure to reduce its vulnerability to external shocks such as trade protectionism.

Weidmann, speaking at the Bundesbank’s Open Day, skirted questions over whether he might become ECB president in November, saying it’s a political decision. He also warned of his concerns that the independence of some central banks, including the US Federal Reserve, is under attack from leaders.

“I worry about the politicisation of monetary policy,” he said. “One doesn’t only need to look towards Europe 2013 when I look at Turkey or at the US, how monetary policy is dealt with, the politicisation of monetary policy, those are questions which are quite decisive for us central bankers.”