Weidmann Says Economic Strength Points to ECB Forecast UpgradeBy and
Bundesbank president comments at speech in Essen, Germany
ECB set to slow stimulus but remains short of inflation goal
Bundesbank President Jens Weidmann said the European Central Bank could raise its economic-growth forecasts when it presents updated projections in two weeks.
“Evidence is mounting the economic outlook will be at least as good as previously forecast, if not even better,” Weidmann, a member of the ECB’s Governing Council, said in the German city of Essen on Wednesday. “Many short-term indicators have surprised positively.”
Any further strengthening of the economy is likely to fuel calls for policy makers to consider ending their bond-buying program, which is currently intended to run until at least September 2018. The ECB predicted in September that growth will be 2.2 percent this year -- the strongest pace in a decade -- and 1.8 percent in 2018.
The 19-nation euro zone is also enjoying its most-synchronized expansion since the single currency was founded at the end of last century. Sentiment is booming -- one indicator published Wednesday showed economic confidence among businesses and consumers at the highest level since 2000.
At the same time, inflation has yet to show signs of a sustained pickup toward the ECB’s goal of just under 2 percent. Consumer-price growth was probably 1.6 percent in November, with core inflation at a tepid 1 percent. That’s a key reason why policy makers opted not to set a definite end date for bond purchases, which will surpass 2.5 trillion euros ($3 trillion) by late next year.
Weidmann reiterated his skepticism over the need for quantitative easing, and said the outlook for prices is slowly improving.
“The development of domestic price pressures shown in the forecasts is in line with a path to our definition of price stability,” he said. “Even after the end of net purchases, monetary policy in the euro area will continue to be very expansionary.”
His fellow Governing Council member Klaas Knot echoed that sentiment, saying the ECB should stop adding to its bond-purchase program after September.
“Patience and confidence should therefore replace suggestions of open-endedness in our communication,” he said in a speech later on Wednesday in London. “Absent deflation risk, a full phasing-out of net asset purchases from September 2018 onward is warranted.”
— With assistance by Brian Swint