Interview with Volker Wieland: "ECB has to take its foot from the accelerator ("Börsen-Zeitung")

According to Prof. Volker Wieland, the European Central Bank's (ECB) monetary policy is not adequate. It did not suit the current growth and inflation outlook, he said in an interview with the German financial newspaper "Börsen-Zeitung". In Wieland's opinion, the ECB should phase out its bond purchases step by step and stop them this year.

Compared to the ECB's former monetary policy, the extensive quantitative easing since 2014 was "out of line", Wieland said, also taking into account interest rate rules. If monetary policy was even more expansionary than indicated by traditional benchmarks such as the Taylor rule, there was even more room for tightening the monetary policy.

The bond purchases harmed the incentives for reforms, Wieland warned. The ECB was criticizing the lack of reforms whereas the monetary policy stance favored this behavior, he said. In Wieland's opinion, there are also risks for financial stability as interest rate risks amassed in the banks' balance sheets. Given the quantitative easing, macroprudential measures could not alleviate this problem.

According to Wieland, "the euro area has not yet overcome its existential crisis". Structural problems in the crisis countries were not solved yet. However, this did not mean that monetary policy could not be tightened.

The optimism regarding the change of power in the US is exaggerated in Wieland's opinion. He does not see a need for a stimulus package and rather recommended measures that enhanced the incentives for the economy in the long run.

The interview in German (free for subscribers):
Börsen-Zeitung: "Die EZB muss den Fuß jetzt vom Gas nehmen"
Börsen-Zeitung: "Wirtschaftsweiser geht mit EZB hart ins Gericht"