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ECB's Weidmann sees no need for policy action

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ECB's Weidmann sees no need for policy action
German Bundesbank President Jens Weidmann presents the annual 2018 report in Frankfurt, Germany, February 27, 2019. REUTERS/Kai Pfaffenbach   -   Copyright  KAI PFAFFENBACH(Reuters)
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FRANKFURT (Reuters) – European Central Bank policymaker and presidential hopeful Jens Weidmann said on Sunday he saw no need for the ECB to change its policy at present, despite a weaker euro zone economy.

The ECB’s Governing Council is due to meet on June 5-6 and decide on the terms of its third round of cheap loans to banks – one of several measures it has deployed to stimulate lending in the bloc.

“This isn’t a situation where prices are falling and we have to react now,” the head of Germany’s central bank told members of the public at the Bundesbank’s open days.

Weidmann added decreasing spare capacity in the economy, namely the extent to which labour, capital and other resources are used below their maximum level, would eventually push up prices.

These have been growing at a slower pace than the ECB’s target of “close, but below 2%” for years despite the central bank’s unprecedented stimulus measures.

Weidmann, a guardian of German economic orthodoxy who has often opposed the ECB’s easy policy, is one of the hot names in the race to replace Mario Draghi as President in November.

But he may face opposition from indebted countries in the bloc’s south, which favour lower interest rates.

“Surely it would be bad to give the impression that certain nationalities are fundamentally excluded from the ECB Presidency,” Weidmann said.

“That would be the opposite of what we want to achieve, which is acceptance.”

(Reporting By Frank Siebelt; Writing by Francesco Canepa; Editing by Raissa Kasolowsky)

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