— ECB Governing Council to Lose One Of Its Most Hawkish Rate Setters
By Laurie Laird
LONDON (MaceNews) – Jens Weidmann, president of Germany’s Bundesbank, will relinquish his position at the end of 2021, ridding the European Central Bank of one its most hawkish voices.
Weidmann has asked German President Frank-Walter Steinmeier to “dismiss” him from office “for personal reasons,” according to a statement released by the Bundesbank on Wednesday.
“I have come to the conclusion that more than 10 years is a good measure of time to turn over a new leaf,” Weidmann wrote in a letter to Bundesbank staff.
The announcement came as a surprise, as Weidmann was reappointed to a second eight-year term little more than two years ago. His warning of inflationary risks could raise questions over a difference of opinion among European rate setters. National central bank leaders sit on the ECB’s governing council and vote on policy decisions on a rotating basis.
‘It will be crucial … not to look one-sidedly at deflationary risks, but not to lose sight of prospective inflationary dangers either,” said Weidmann’s statement. “A stability oriented monetary policy will only be possible in the long run if the regulatory framework of the Monetary Union … respects its narrow mandate and does not get caught in the wake of fiscal policy of the financial markets.”
Weidmann’s departure comes as ECB rate setters grapple with a sharp rise in inflation, to a 13-year high of 3.4% in September, according to data released earlier on Wednesday, well above the ECB’s 2.0% target. German consumer prices rose by an annual rate of 4.1% last month, the fastest pace in 30 years.
Rate setters appear to be at odds over the response to increasing prices pressures. Last week, Dutch central bank governor Klaas Knot warned of “upside risks” for headline inflation and voiced support for a March conclusion to the ECB’s €1.85 trillion Pandemic Asset Purchase Programme.
However, ECB Chief Economist Philip Lane was more cautious in a panel discussion hosted by the Bank of Finland on Tuesday, noting that ECB staff forecast inflation falling back to 1.5% in 2023. The governing council “can look through transitory shocks,” he said.
Weidmann will remain a voting member of the ECB’s governing council at the final two meetings of 2021, with the ECB due to issue its latest policy statement next week.
“I respect Jens Weidmann’s decision to step down from his position of President of Deutsche Bundesbank … but I also immensely regret it,” said ECB President Christine Lagarde. “While Jens had clear views on monetary policy I was always impressed by his search for common ground in the Governing Council.”
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Contact this reporter: laurie@macenews.com
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