Fri, Dec 01, 2017 - Page 10 News List

Weidmann says indicators hint ECB forecast upgrade

Bloomberg

Deutsche Bundesbank President Jens Weidmann said the European Central Bank (ECB) could raise its economic-growth forecasts when it presents updated projections in two weeks.

“Evidence is mounting that the economic outlook will be at least as good as previously forecast, if not even better,” Weidmann, also a member of the ECB’s Governing Council, said in the German city of Essen on Wednesday.

STRONG INDICATORS

“Many short-term indicators have surprised positively,” he said.

Any further strengthening of the economy is likely to fuel calls for policymakers to consider ending their bond-buying program, which is currently intended to run until at least September next year. The ECB predicted in September that growth would be 2.2 percent this year — the strongest pace in a decade — and 1.8 percent next year.

The 19-nation eurozone is also enjoying its most-synchronized expansion since the single currency was founded at the end of the last century.

CONFIDENCE

Sentiment is booming — one indicator published on Wednesday showed economic confidence among businesses and consumers at the highest level since 2000.

At the same time, inflation has yet to show signs of a sustained pickup toward the ECB’s goal of just under 2 percent.

Consumer-price growth was probably 1.6 percent this month, with core inflation at a tepid 1 percent.

That is a key reason why policymakers opted not to set a definite end date for bond purchases, which are to surpass 2.5 trillion euros (US$3 trillion) by late next year.

Weidmann reiterated his skepticism over the need for quantitative easing, saying the outlook for prices is slowly improving.

“The development of domestic price pressures shown in the forecasts is in line with a path to our definition of price stability,” Weidmann said.

‘VERY EXPANSIONARY’

“Even after the end of net purchases, monetary policy in the eurozone will continue to be very expansionary,” Weidmann added.

His fellow Governing Council member Klaas Knot echoed that sentiment, saying the ECB should stop adding to its bond-purchase program after September.

“Patience and confidence should therefore replace suggestions of open-endedness in our communication,” Knot, also governor of De Nederlandsche Bank, said in a speech later on Wednesday in London.

“Absent deflation risk, a full phasing-out of net asset purchases from September next year onward is warranted,” he said.

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