European Central Bank council member Jens Weidmann said policy makers will react if inflation pressures increase.
“We have a clear mandate and a clear hierarchy of our goals, and the first is to maintain price stability,” Weidmann, who heads Germany’s Bundesbank, said in an interview with Bloomberg Television in Frankfurt today. “We’re determined to do so. You can be assured we will react if inflation pressures arise.”
The ECB has cut its benchmark interest rate to a record low of 1 percent and flooded the banking system with cheap cash to fight the sovereign debt crisis and stimulate growth. At the same time, rising oil prices are stoking inflation, prompting ECB President Mario Draghi to say last week that short-term risks to price stability have moved to the upside.
Weidmann said price expectations “are still solidly anchored” and there are no signs at the moment that rising energy costs are driving up other prices.
So-called second-round effects “would be a major risk we’d have to watch for,” he told reporters after presenting the Bundesbank’s annual report. “We don’t see it now.”
Weidmann also said house prices in Germany have risen about 5.5 percent in the past year. “This is something we need to watch, not as policy makers but as an institution that is responsible for financial stability,” he said.
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