Jens Weidmann Christine Lagarde
For the Bundesbank Tapering to be started also in Europe before March 2022. After theassist gives Jackson Hole of the president of the Federal Reserve Jerome Powell Everyone colombe of the states of Southern Europe headed by the president of the ECB Christine Lagarde, the head of the hawks of the North Jens Weidmann still brings to light the internal clash within the Eurotower over the duration of the Pandemic emergency purchase programme (Pepp), securities purchase program from 1850 billion available launched at the beginning of the spread of Covid-19 in Euroland which for the time being the European central bank has used for 1.325 billion.
Weidmann doesn’t mince words: we must prepare for the end of Pepp, before the natural deadline of March 31, 2022. L’euro area inflation, explained the president of the Bundesbank in a speech delivered today at the German central bank, is likely to exceed the projections of the ECB so long as the temporary factors behind its recent peak they could infiltrate the underlying price growth.
Leuro zone inflation hit 3% last month and the ECB board of directors expects that increases in the coming months before returning below the 2% target early next year. Therefore temporary inflationary flares that will hold the trend prices still far from achieving the Eurotower statutory objective.
“In my opinion, upside risks are currently predominant – explained Weidmann – and if these temporary factors were to lead to higher inflation expectations and an acceleration of wage growth, the rate of inflation could increase significantly over the long term“. So, no temporariness of the price increase which would remain above 2%, forcing Frankfurt to then make an abrupt change of course.
Weidmann added that an expansionary monetary policy is still appropriate, but the ECB should also prepare for the end of its pandemic emergency purchase program (Pepp) so long as the economy is now booming and inflation is on the rise.
“The first P in Pepp stands for pandemic, not permanent, and this for good reason“, he added about the buying program which is now expected to end in March next year and pulling a jab at the doves ofEurotower. Since the purchases should not have ended abruptly – added Weidmann – the ECB should gradually reduce them even before signaling their end.
This morning, the words of the German central banker were preceded by those of the vice president of the ECB, the Spaniard Luis de Guindos, who in an interview granted on August 26 and published today on the Eurotower website, recalled how the main source of uncertainty was “the impact that the Delta variant would have. What we are seeing is that it is not having as big an impact as we predicted four months ago. This is mainly due to the fact that governments have responded with fewer restrictions on economic activity than we had anticipated. “Until now, however, the ECB had indicated that it expected a return to pre-covid levels only in the first quarter of 2022.
the upcoming meetings of 9 September and 28 October of the Governing Council of the ECB they could be the harbingers of some news on the general orientation of the Eurotower. Themes to be handled with care since some operators are already betting on a selloff of Italian and French government bonds in anticipation of the downsizing of asset purchases by the ECB.