Bundesbank Pushes Back Against Claims ECB Stoking Inequality
| FlashRatings | Monday, September 19, 2016 2:48 PM EDT
Germany’s powerful Bundesbank pushed back on Monday against claims that the European Central Bank’s very accommodative monetary policy was widening the gap between rich and poor.
In its latest monthly report, the German central bank rejected arguments that negative interest rates and huge asset purchases were disproportionately benefiting the rich because they owned the lion’s share of financial assets.
“The statement seen in many places – that extraordinary monetary policy measures have increased inequality—cannot be substantiated,” the Bundesbank said. While changes in monetary policy do affect stock prices immediately, they also have delayed effects on consumption, investment and employment that need to be taken into account, the central bank said.
“Not just asset prices should be considered,” the Bundesbank said, “but also delayed effects through changes in the labor market.”
The Bundesbank and its President Jens Weidmann have been critical of the massive bond buying of the European Central Bank, but Weidmann has also defended the ECB and its President Mario Draghi against intense criticism in Germany that record low interest rates represents a tax on savers.
“Citizens as a rule aren’t just savers, but also workers, shareholders, taxpayers or property owners,” Weidmann said in a speech last week.
But Weidmann has also continued to argue that interest rates must not say at current extremely low levels any longer than necessary.
"Under no circumstances can interest rates remain so low for longer than is absolutely necessary with regard to price stability," Weidmann said in an interview with a group of European newspapers on Monday. “The risks of ultra-loose monetary policy become larger the longer the phase of low interest rates lasts," he said.