August 4, 2016 / 6:55 AM / 3 years ago

Possibilities to adjust QE but must not alter design-ECB's Weidmann

BERLIN, Aug 4 (Reuters) - There are possibilities to adjust the European Central Bank’s quantitative easing (QE) programme, but it is important not to alter the design, Bundesbank President Jens Weidmann said in an interview published on Thursday.

“With a view to the programme, there are adjustment possibilities. But from my point of view we must be very careful with the configuration,” Weidmann told weekly Die Zeit.

The ECB currently buys bonds weighted to each country’s contribution to the central bank’s capital. Germany is currently the biggest beneficiary therefore, but changes would potentially allow other countries to benefit.

Weidmann said an increase in buying bonds from countries with particularly high indebtedness or bad credit ratings would distance the ECB further from its core mandate.

“If we grant individual countries special conditions or concentrate increasingly on highly-indebted countries than we will blur the lines between monetary policy and fiscal policy somewhat further,” he told the paper.

“This can lead to the independence of the central bank being called into question, which is, however, the basis for stability-orientated monetary policy,” he said.

He added this could increase the pressure in the end to keep interest rates lower for longer than is necessary with a view to prices if highly indebted states could not withstand a rate rise. (Reporting by Caroline Copley; Editing by Madeline Chambers)

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