Volker Wieland warns central banks against overreaction ("Börsen-Zeitung")

Right before the annual central bankers meeting in Jackson Hole, Wyoming, Volker Wieland has warned central banks worldwide against overreacting in their monetary policy decisions. "Central banks must not overdo", he said in an interview with the German financial daily "Börsen-Zeitung".

According to Wieland, in the U.S. a turnaround toward a longer cycle of various cuts in interest rates "is not appropriate". Regarding the euro area, he asked the European Central Bank (ECB) to be prudent. In his opinion, the ECB has not made use of the good economic development to adjust monetary policy in a moderate way. Though inflation was still below target, monetary policy remained expansionary. Therefore, Wieland does not see any reason for further crisis measures, "which would cause considerable side effects". Since central banks' expanded balance sheets incite desires, central banks should face them with clear exit strategies.

In this context, Wieland recommends the application of interest rates rules. "If the ECB revises its strategy, it should apply such rules to the monetary union and publish them. In doing so, the ECB could link the symmetry of its policy to those rules".


Börsen-Zeitung: "Die Notenbanken dürfen nicht überreagieren" (€)