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Currency Analyst since 2010

Bundesbank is ready to act

Bundesbank President Jens Weidmann said on Wednesday that German central bank is ready to back ECB policy action if needed. At the same time, Weidmann underlined that not every measure under discussion is suitable and large-scale asset purchases may well not be.

The euro area inflation is below 1% for 7 months and this creates the necessity for more easing. However, Weidmann believes that the ECB could not decide to act on the basis of the inflation forecast alone. It also needed to analyze whether the medium-term outlook for inflation had deteriorated and if so, whether the factors driving inflation lower would persist.

Last week the ECB head Mario Draghi said that the Governing Council was “comfortable with acting next time” (this means on June 5), but wanted to see updated economic projections from the bank’s staff first.

According to UBS, Weidmann’s statement “will keep downtrend in EUR/USD intact”.

 

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