Bundesbank President Jens Weidmann said it was not ‘out of the question’ for the European Central Bank to buy bank assets to fight deflation, in a softening of the German central bank’s strict stance on the issue.
Quantitative easing (QE) is when a central bank buys loans or other assets from banks and would represent a radical departure for the ECB, which has so far, not least under pressure from Germany, refused to make such a move.
Weidmann, who is a member of the European Central Bank Governing Council told MNI in an interview published on Tuesday that the scope of the ECB’s conventional tools, such as changes to the interest rates, was limited.
“The unconventional measures under consideration are largely uncharted territory. This means that we need a discussion about their effectiveness and also about their costs and side-effects,” Weidmann said in the interview, conducted on Friday.
“This does not mean that a QE program is generally out of the question,” Weidmann said. “But we have to ensure that the prohibition of monetary financing is respected.”
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