MNI: ECB Weidmann Urges For Set End-Date for the Bank's APP

By Christian Vits

     FRANKFURT (MNI) - Jens Weidmann, President of Germany's Bundesbank, Friday

emphasised his criticism about the open-ended asset purchase program of the

European Central Bank.

     "A less distinct loosening of monetary policy in the next year and setting

a clear end date for net asset purchases would have been justified -- also

against the backdrop of increasing risks and side-effects, the longer monetary

policy remains ultra-loose," Weidmann said in a speech at the European Banking

Congress in Frankfurt.

     The ECB last month decided to halve its purchases from the current E60

billion per month to E30 billion but extend the bond-buying program for nine

months, effective from the start of next year. ECB President Mario Draghi argued

that there is still "a large amount of uncertainty" and added that the decision

"is for an open-ended program and it is not going to stop suddenly."

     Weidmann admitted, given the rather subdued inflationary pressure at

present, that an accommodative monetary policy stance "remains appropriate".

     "But we must be attuned to the fact that the economic recovery has

progressed further than inflation figures currently suggest, and that domestic

price pressures will gradually increase in keeping with a path towards our

definition of price stability," he stressed.

     Even after net purchases under the APP have been discontinued, the region's

monetary policy will remain highly accommodative, Weidmann said.

     "What is crucial for the overall effect of the APP is not so much the

amount of monthly additional purchases but, above all, the total outstanding

volume of sovereign bonds on our books," he said.

     He underlined that the APP stocks held will remain at a "very high level"

even after net purchases have ended, as the ECB has decided to reinvest the

proceeds from the maturing bonds.

     With a view to Germany, Weidmann said that indicators suggest even stronger

growth than outlined in the Bundesbank's June projection, adding that since last

year, the economy is running above capacity.

--MNI Frankfurt Bureau; +49 69 97782671; email: christian.vits@marketnews.com

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