ECB Was Right to Act But Went Too Far in March, Weidmann Says

  • Central bank cut inflation outlook at last policy meeting
  • Bundesbank president gives speech at Liechtenstein conference

European Central Bank Governing Council member Jens Weidmann said policy makers were right to deploy additional measures at their March meeting, although the tools they adopted were excessive.

“Revised economic projections were challenging in monetary-policy terms and showed a need to act,” Weidmann, who heads Germany’s Bundesbank and didn’t vote at the March meeting, said in a speech in Vaduz, Liechtenstein. “However, decisions overall went too far in my opinion and the comprehensive set of measures didn’t convince me.”

The ECB unleashed a new stimulus program this month, cutting its deposit rate deeper below zero, expanding bond purchases and offering cheap loans to banks to help stoke inflation. Monetary conservatives, including those at the Bundesbank, warned against such steps.

The central bank’s mandate of reaching its inflation goal in the medium term doesn’t mean “as fast as possible and at every price,” Weidmann said. He added that there’s a “very limited” risk of a deflationary spiral.

While euro-area core inflation won’t reach a level consistent with price stability by 2018, it’s too early to say whether the decline in this measure will be temporary or lasting, according to Weidmann. The core measure, which excludes volatile food and energy, cooled to 0.8 percent in February, the weakest level since June.

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