ZURICH (MaceNews) – Bundesbank President Jens Weidmann that current price increases in Germany are of a temporary nature and that he doesn’t see signs of higher inflation rates solidifying.
In an interview with the business daily Handelsblatt, Weidmann said that “from our viewpoint, the sharp price increases in Germany are temporary and there aren’t signs of excessive rates medium-term.”
Should inflation remain stubbornly high, “excessive inflation would require, among other things, excessive wage agreements,” Weidmann said, adding “we currently have no evidence of this.”
He went on to say that “does not change the fact that in Germany, in particular, there is great concern about permanently high inflation.”
Expectations are inflation will be at four percent by year end, which “for consumers, of course, an inflation rate of four percent temporarily – as we expect in Germany at the end of the year – means that their purchasing power will decrease accordingly. But that is true compared to last year. Among other things, it must be taken into account that in 2020 purchasing power was increased due to the temporary VAT cut,” Weidmann said.
Asked about European Central Bank policy, he said that a loose monetary policy is appropriate even with favorable economic news for the euro area. Price increases are still “noticeable below two percent according to our forecasts for 2022 and 2023. Therefore, a loose monetary policy is currently the right” policy.
Weidmann said he considers “a somewhat stronger price development possible, and with further progress in coping with the pandemic, hopefully crisis-related special measures will soon be reduced.”
Discussing the Pandemic Emergency Purchase Program (PEPP), he said that support should not be withdrawn too soon and that the essential measures “to contain the pandemic are phased out and that the economy recovers. We certainly should not withdraw support too soon.”