FRANKFURT (MNI) – The European Central Bank’s OMT bond-buying
program could cause higher inflation over the medium term and risks
harming the central bank’s credibility as a guarantor of price
stability, Germany’s leading economic institutes warned in a joint
report, according to German daily Frankfurter Allgemeine Zeitung.
“The institutes see the risk that inflation rises in the medium
term,” FAZ wrote on on Wednesday. “This process can be unleashed by the
ECB buying sovereign bonds in large amounts and ultimately engaging in
monetary state financing.”
The institutes warned this could lead to markets losing trust in
the ECB’s ability to secure price stability: “Sooner or later inflation
expectations would then become unanchored.”
The report, which is to be presented to the German government in
Berlin Thursday, offers some cover for Germany’s Bundesbank, which was
alone among Eurozone national central banks in opposing the ECB’s
bond-buying plan, unveiled last month.
Bundesbank President Jens Weidmann has been very outspoken in his
criticism of the ECB plan, but Germany’s Chancellor Angela Merkel and
Finance Minister Wolfgang Schaeuble have supported it.
Participating institutes in the report include Ifo, IfW, IWH and
RWI.
The institutes also slashed their forecast for German economic
growth next year, projecting GDP would expand 1% in 2013, down from
+2.0% predicted in the spring, according to excerpts reported earlier
Wednesday by German daily Financial Times Deutschland. The GDP forecast
for 2012 was revised down 0.1 percentage point to +0.8%.
— Frankfurt bureau: +49 69 720 142; email: ccermak@mni-news.com
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