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5/29/2017, 10:24 PM (Source: TeleTrader)
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Weidmann: Time for ECB to think of QE exit plan

The rebound of Eurozone's inflation came mostly due to a spike in energy prices, as opposed to subdued underlying levels, said Jens Weidmann, head of the Deutsche Bundesbank. Speaking in Berlin on Monday, he stressed "expansive monetary policy is still appropriate in principle," mirroring remarks delivered earlier by European Central Bank's President Mario Draghi. However, according to Germany's representative in the institution's Governing Council, it is "legitimate to ask" when rate-setters will consider scaling back quantitative easing (QE). 

He is known for criticizing the extent of the stimulus and calls to reconsider the strategy, and today he repeated purchases of government bonds blur the border between monetary and fiscal policies. The emergency measures were launched to fight deflation pressures, which have weakened, the policymaker said. 

Weidmann attributed the lag in core inflation to the effect of the past financial crisis. For instance, he said, bad debt hampers banks' ability to lend to emerging dynamic companies. The German central banker praised the determination of French President Emmanuel Macron to pursue measures for economic reforms as well as his commitment to the monetary union's fiscal rules. Turning to potential bubbles, Weidmann said the next crisis can be triggered by one of the numerous cyberattacks in the case a significant bank is paralyzed, disrupting the system.

Breaking the News / IT