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In an interview with the Frankfurter Allgemeine
Sonntagszeitung, Jens Weidmann, a member of the European Central
Bank's Governing Council, also reiterated his opposition to ECB
plans to buy sovereign bonds.
The ECB is watching carefully how a recent drop in oil prices
will affect euro zone inflation, far below its target of just
below 2 percent, and standing ready to do more to keep the
region from slipping into deflation.
"As things are at the moment and if oil prices remain this low,
inflation will be lower than expected, but growth will be
better," Weidmann was quoted as saying.
The Bundesbank this month halved its growth forecast for Germany
to 1.0 percent for next year. It also cut its prediction for
2014 growth to 1.4 percent from 1.9 percent in June.
"The situation in Europe isn't as bad as some people believe,"
added Weidmann.
Having largely exhausted its policy toolkit with the key
interest rate at a record lows of 0.05 percent, broad-based
purchases of sovereign bonds - also known as quantitative easing
(QE) - are seen as the ECB's last resort to revive the economy.
But some ECB policymakers have reservations.
Weidmann is the most vocal opponent of such a step in the
24-member Governing Council, concerned the central bank could
end up bankrolling troubled euro zone governments and lose sight
of its mandate to keep prices stable.
"(With low oil prices) An economic stimulus program has been
handed to us, why should we add to that with monetary policy?"
said Weidmann, adding that pressure from financial markets
should not determine the ECB's moves on buying up sovereign
bonds.
"I am irritated by one question dominating the recent public
debate: when will you finally buy?" said Weidmann.
(Reporting by Madeline Chambers)
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