Ifo President Fuest: Time for ECB to Take its Foot Off the Gas
Mar 9, 2017
Ifo President Clemens Fuest expects an inflation rate of just below two percent in Germany and the euro area for 2017.
“This is an indication that it is time for the European Central Bank (ECB) to start phasing out its expansionary monetary policy in Europe. It should now take its foot off the gas and scale back its bond purchases by 10 billion euros per month as of April,” said Fuest. The ECB is currently spending 60 billion euros a month on bond purchases to boost inflation towards the two percent marker. “The ECB should stem this flood of money or run the risk of overshooting its target,” he added.
Fuest explained the logic behind his call for lower bond purchases as follows: “Company surveys by Ifo show that a growing number of firms plan to raise their prices in the months ahead. The results point to a core inflation rate (excluding energy) of around 1.5 percent this year in Germany. And the effect of energy prices will boost this figure. Inflation is increasing in Germany and in Europe, while companies’ price expectations in the Eurozone as a whole are also on the rise.”
Publication (in German)
Prof. Dr. Timo Wollmershäuser
Ifo Center for Business Cycle Analysis and Surveys