By Sheila Mullan
NEW YORK (MNI) – European Central Bank governing council member
Axel Weber said Tuesday he believes it is “much more difficult” to
restrain inflation “on the way up” than on the way down.
Noting the differences with U.S. monetary policy, Weber said the
Federal Reserve is more concerned about anchoring inflation expectations
to the downside,” while the ECB is concerned about anchoring
expectations “from going up.”
Responding to question following a speech to the Shadow Open Market
Committee, Weber said, “First if a central bank signals that it wants
higher inflation, they usually get it. But if central banks want to
arrest inflation to the downside,” monetary policy “can do that.”
But “on the way up, it is more difficult” to restrain
inflation expectations from moving higher than to prevent inflation
expectations from moving lower.
He noted that ECB is “more focused” on price stability, given its
history of inflation, while the
FOMC has the dual mandate of price stability but and full employment.
On the European economy, Weber said it is a judgement call for
countries as to whether labor weakness is “structural or cyclical.”
In the United States, as there is much more geographical mobility
for labor, while “Germany is the only country in Europe where
unemployment fell in the financial crisis.”
The Bundesbank president warned against the idea of competitive
currency devaluations, and noted that Germany’s strong exports
are based on strong product quality.
“Conservative” monetary policy and “long-term” goals are the “best
route,” he noted, and it is “how we are built in Germany,” where for
example he hailed the 13% savings rate and planning by individuals for
retirement and old age.
He noted that some countries that pledged at the Toronto Group of
20 summit to loosen up their foreign exchange regimes failed to live up
to those promises but that they must still do so, presumably referring
to China.
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