ECB Doesn't Need to Constantly 'Push on the Gas' With QE, Weidmann Says

By Tom Fairless Features Dow Jones Newswires

The European Central Bank should start reducing its bond purchases as the eurozone economy picks up, German central-bank president Jens Weidmann argued Friday, two weeks ahead of a key policy meeting where the ECB is expected to lay out its next steps.

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"I don't see the need to continually push on the gas," Mr. Weidmann said at a news conference in Washington, pointing to a recent upgrade in economic growth forecasts for the 19-nation currency bloc.

He argued that the ECB's policies will continue to stimulate the eurozone economy even if net bond purchases are cut to zero, because the bank will still hold a large stock of QE bonds on its balance sheet. Central banks across advanced economies are still in "ultra-expansionary" mode despite accelerating growth, he said.

The ECB is currently buying EUR60 billion per month of mainly government bonds under its quantitative-easing program, which is due to run at least through December. The bank is expected to announce on Oct. 26 what will happen to QE next year.

Top ECB officials have recently urged caution, pointing to still-weak inflation, which has undershot for years. Peter Praet, the ECB's chief economist, has suggested QE might be extended for a lengthy period, perhaps nine months, but at a much reduced pace.

Mr. Weidmann acknowledged that inflation is likely to rise only gradually over the coming years. But he called for a "relatively swift normalization" of ECB policies once the economic outlook allows it.

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"It's not about hitting the brake but not constantly pushing on the gas, " said Mr. Weidmann, who is a member of the ECB's governing council.

Write to Tom Fairless at tom.fairless@wsj.com

(END) Dow Jones Newswires

October 13, 2017 10:14 ET (14:14 GMT)