Merkel Defends ECB From German Criticism After Deflation Scare

German Chancellor Angela Merkel defended the European Central Bank’s right to implement stimulus measures, making a rare comment on monetary policy as she said the institution must be a bulwark against euro-area deflation.

While reiterating her commitment to the ECB’s independence, Merkel told a conference of family-owned businesses on Friday that she just wanted to say “one thing,” in reference to criticism in Germany that low interest rates penalize savers.

“I would at least call for your understanding that a central bank such as the European Central Bank must also consider what to do when inflation rates are so low,” Merkel said. “It really is the mandate of the ECB to ensure that we don’t enter into a deflationary development.”

The inflation rate in the euro area climbed to 0.3 percent in May, the first positive number in six months. The ECB’s goal is to keep consumer-price gains at just under 2 percent.

The euro, which has lost more than 7 percent of its value against the dollar this year, fell 0.5 percent to $1.1197 as of 12:19 p.m. Frankfurt time. The single currency climbed to almost $1.40 last year, before the ECB cut interest rates to record lows and started asset purchases.

A stronger exchange rate made it more difficult for countries such as Spain and Portugal to implement structural reforms as they struggled with costlier exports, Merkel said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE