German Central Banker Says No Reason For Inflationary Fear

The president of Germany’s Bundesbank said on Thursday there was no reason for “irrational inflationary fears” and dismissed suggestions of a danger of the euro zone falling into deflation, echoing the European Central Bank’s outlook.

Jens Weidmann also urged France to live up to its function as a role model and show its peers how to restore economic competitiveness, saying it was decisive for the recovery of the whole the euro zone.

A member of the ECB’s governing council who tends to take a more hawkish view than many of his peers, Weidmann backed the ECB’s expansionary policy stance citing subdued price and economic developments in the euro zone.

His comments suggest that opinions on the council seem less divergent than for example last year, when Weidmann argued against aggressive interest rate cuts.

More harmonized views within the council could bode well for policy decisions as the ECB considers further non-standard measures, having almost depleted its conventional tool box.

“I fully agree with my colleague Mario Draghi that there is no reason to cultivate irrational inflationary fears,” Weidmann said in a speech in Berlin, adding that the euro zone was also not about to fall into a deflationary scenario.

Many analysts and international organizations are, however, more concerned of the 18-country bloc falling into a spiral of decreasing prices.

via Reuters

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