Germany's Bundesbank warns against prolonged expansionary monetary policy in Eurozone

Source: Xinhua| 2019-05-03 22:57:06|Editor: Mu Xuequan
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FRANKFURT, May 3 (Xinhua) -- President of German central bank (Bundesbank) Jens Weidmann warned on Friday here against the prolonged expansionary monetary policy implemented by the European Central Bank (ECB).

"Against the backdrop of the diminishing effect of the expansionary monetary policy, I have repeatedly pointed out its risks and side effects," said Weidmann, also member of the ECB's Governing Council.

In his view, the prolonged low interest rate environment is increasingly burdening financial institutions such as banks in the euro area, which generate their income through deposit and lending business.

Not only that, but risks and side effects of the prolonged loose monetary policy are also concerned with risks to financial stability, which may ultimately endanger price stability in eurozone, underlined Weidmann.

The weaker overall economic growth in the euro area indicated that inflation would not strengthen as quickly as it had been expected at the end of 2018.

The ECB therefore decided in March to adopt a series of measures to re-ensure accommodative monetary policy stance, including postponing the date of a possible first interest rate hike further beyond the end of 2019.

"Monetary policy normalization will be a challenging task for the Eurosystem in the coming years," said Weidmann, given the stability-oriented nature of economic and financial policies in the euro area.