Volker Wieland criticizes continuation of Quantitative Easing ("Neue Zürcher Zeitung", "Welt am Sonntag")

For Volker Wieland, the European Central Bank’s (ECB) decision to reduce the scale of its bond buying program is a step in the right direction. In his opinion, however, monetary policy is still too expansionary.

During its meeting on December 8, the Governing Council of the ECB had decided to continue its asset purchase program after March 2017 and prolong it until December 2017. From April on, the monthly pace decreases from 80 billion euros to 60 billion euros. According to Wieland, inflation would have provided scope for at least preparing the exit from the very expansionary monetary policy. Looking at the GDP deflator, Wieland refers to the prices of the goods produced in the euro area, which had been rising at one percent per year during the last five years. In his view, the ECB should react to this development as the “Neue Zürcher Zeitung” writes.

Wieland is also skeptical about ECB president Draghi’s reference to the prevailing uncertainty. “Basically, central banks’ monetary policy is not supposed to be oriented towards the electoral calendar,” Wieland said to “Welt am Sonntag”. According to Wieland, uncertainties and risks are assessed asymmetrically. While the ECB attached a high priority to political risks, it did not consider risks for the banking system that resulted from the low-interest phase, he said.

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