Following Austria's central bank boss Robert Holzmann and the Dutch central bank governor Klaas Knot, Bundesbank President Weidmann has also sent out signals that the European Central Bank will have to discuss the pace of its bond purchases in the coming week in view of inflation, economic growth and financing conditions.

Inflation forecasts still below target

Christian Siedenbiedel

Editor in business.

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Weidmann said at a conference on Wednesday that in the coming week the ECB staff would publish new projections for inflation and growth, which he did not want to anticipate.

Most recently, the inflation forecast for the euro area in the coming years was still well below the target rate.

An expansionary monetary policy is therefore still appropriate.

"But we shouldn't ignore the risk of too high inflation," warned Weidmann: "In view of the existing uncertainty, we shouldn't fix the very loose course of monetary policy for too long." The PEPP crisis program is closely tied to the pandemic and must be terminated as soon as the emergency situation has been overcome.

Upside risks to inflation dominate

The opening of the economy has also contributed to the fact that the inflation rate has recently increased significantly, said Weidmann: "We expect rates for Germany at the end of the year that could go in the direction of 5 percent."

However, mainly temporary factors are at work here, such as the rise in crude oil prices and the return to higher VAT rates: "Accordingly, the inflation rate will moderate again next year as soon as these effects run out - both in Germany and in the euro area as a whole."

"However, we also have to pay attention to the risks involved in the price outlook," said the Bundesbank President. “From my point of view, the upside risks currently predominate.” Supply bottlenecks could trigger additional price increases. The savings accumulated in the pandemic also played a role: “Private households could spend more on consumption than we expect,” said Weidmann: “And if these temporary factors lead to higher inflation expectations and accelerated wage growth, the inflation rate can rise noticeably in the longer term . "

Because of the ongoing uncertainty, the ECB could not determine the exit from the PEPP crisis program well in advance, said the Bundesbank President: "So that the PEPP net purchases do not have to end abruptly, we should, in my opinion, gradually reduce them beforehand, if the Situation allowed. "