FRANKFURT (Reuters) – Inflation in the euro zone might confound the European Central Bank’s expectations and stay above 2% for some time, so the ECB shouldn’t commit to keeping its policy ultra-easy for too long, the Bundesbank’s outgoing President Jens Weidmann said on Friday.
Speaking soon after ECB President Christine Lagarde called for ongoing support for the euro zone’s economy, Weidmann struck a decidedly different tone.
“Higher inflation expectations and higher wage growth could strengthen price pressures in the medium term,” Weidmann said. “And it could well be that inflation rates will not fall below our target over the medium term, as previously forecast.”
Weidmann, who will step down at the end of the year after a decade of largely vain opposition to the ECB’s easy-money policy, said the ECB should in fact signal it is ready to tighten policy if needed.
“Given the considerable uncertainty about the inflation outlook, monetary policy should not commit to its current very expansionary stance for too long,” he said.
“And to keep inflation expectations well anchored, we need to reiterate over and over again: if required to safeguard price stability, monetary policy as a whole will have to be normalised.”
(Reporting By Francesco Canepa; Editing by Balazs Koranyi)