Bundesbank President Urges Patience for QE Measures to Take Effect

Bundesbank President Jens Weidmann urged policy makers at the European Central Bank to be patient and await the full impact of recently-announced policy measures, warning that the risk of those policies increased over time.

“I’d like to stress one thing: Our definition of price stability requires that the inflation rate target is achieved in the medium term,” Mr. Weidmann said on Monday at a conference in Frankfurt.

“That gives us enough time to wait for the effects of the agreed monetary policy measures on price developments.”

The ECB aims to keep inflation just below 2% over the medium term, but it has missed that target for the past three years. Policy makers have responded with a range of unorthodox measures aimed at driving inflation back toward target, including negative interest rates and a massive bond-purchase program.

While Mr. Weidmann conceded that expansionary central-bank policy is currently appropriate given the weak outlook for inflation, he warned that the ECB had little experience with its unconventional policy measures, including bond purchases, and that “the risks and side effects of ultraloose monetary policy increase over time.”

via WSJ

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza