FRANKFURT (Reuters) - The European Central Bank should restore the monetary policy it had before it launched its aggressive stimulus measures, to save firepower for the next crisis and preserve normal market activity, ECB policymaker Jens Weidmann said on Friday.
Having, since 2015, pumped 2.6 trillion euro ($2.95 trillion) into the euro zone’s financial system in a bid to revive inflation, the ECB plans to stop adding to its bond pile in December and raise interest rates in late 2019 for the first time in eight years.
Weidmann, the Bundesbank’s president and one of the most prominent hawks on the ECB’s policymaking body, said the massive purchases of government bonds had deprived investors of valuable “safe assets” and taken away an incentive for banks to lend to each other.
“A monetary policy framework that achieves effectiveness in reaching our primary mandate and that, at the same time, leaves enough room for market activities is the most desirable,” Weidmann told a conference.
“Until it is proven that a return to the pre-crisis framework constrains effectiveness of monetary policy in a non-trivial way, I see no reason to depart from the pre-crisis framework,” he added.
($1 = 0.8823 euros)
Reporting by Francesco Canepa; editing by Andrew Roche