ECB entering 'new ground' with latest measures - WeidmannTuesday 10 June 2014 16.24
The package of monetary policy measures agreed by the European Central Bank last week are an indication of how little room it has to cut rates in order to deal with the inflation outlook, Governing Council member Jens Weidmann said.
The ECB cut interest rates to record lows last Thursday.
It also launched a series of measures to pump money into the sluggish euro zone economy and pledged to do more if needed to fight off the risk of Japan-like deflation.
"The interest rate cuts were a response to the unsatisfactory inflation outlook," Weidmann was quoted as saying in an interview with German daily Boersen-Zeitung, adding that the central bank was entering "new ground" with such measures.
"That we took unconventional measures is both down to the fact that we have almost used up the room to cut rates, and that we wanted to ensure that our expansive monetary policy also came through to the real economy," he said.
He also said the measures were a "wake-up call" for governments that needed to continue with reforms.
Weidmann, president of Germany's Bundesbank, said that low inflation rates since 2013 had increased the risk that further negative surprises could de-anchor the ECB's long-term inflation expectations.
"The monetary situation is different to what it was two or three years ago," he said. "The medium-term inflation outlook is significantly below our definition of price stability."
He added that as soon as the current phase of low inflation comes to an end, then the ECB would normalise its monetary policy.
"I will do what I can to ensure that monetary policy does not remain so loose for any longer than necessary," he said. He also said it was too early to look at further measures. "It's unnecessary and will devalue what we've just decided."