Bundesbank President Jens Weidmann paid tribute to the former Governor of the Oesterreichische Nationalbank (OeNB) and member of the ECB Governing Council, Ewald Nowotny. “In his charming way, Ewald Nowotny has always been an independent and ingenious thinker,” said Mr Weidmann in a speech held in Vienna. “And as such, he has, for many years, left his mark on the Governing Council of the ECB,” Mr Weidmann continued. The Bundesbank President went on to wish Mr Nowotny’s successor, Mr Robert Holzmann, every success, adding that he looked forward to future encounters and dialogue within the ECB Governing Council and beyond. Mr Nowotny thanked Mr Weidmann for coming and also reflected on his time in office. He said that “central banks are institutions based on stability and sustainability” and that it had been an honour for him to hold the office of Governor, which also allowed him to be a part of the ECB Governing Council.

Purchasing limits should not be changed

In terms of monetary policy, Mr Weidmann warned in his speech against attempts to change the rules of the Eurosystem’s purchase programme. He stated that boundaries had been drawn to mitigate the risk of monetary policy being harnessed to fiscal policy. According to these rules, the Eurosystem may only purchase bonds issued by a government up to a maximum volume of 33% of all government bonds outstanding. Moreover, purchases are made in line with the ECB’s capital key and not according to the amount of a euro area country’s government debt.

Against the backdrop of the latest decisions by the ECB Governing Council, Mr Weidmann warned that it would only be a matter of time before purchasing restrictions would be called into question. At its meeting in September, the ECB Governing Council passed a new comprehensive package of accommodative monetary policy measures, including its decision to restart net asset purchases. The Bundesbank President reiterated his criticism of these decisions in Vienna, calling the extensive package of measures in its entirety unnecessary and overdone and pointing out that the economic situation and the outlook in the euro area were not so bad. “Wages are rising clearly, the forecast for the inflation rate two years ahead was lowered only slightly and there is no evident danger of deflation, in other words a permanent drop in prices and wages,” Mr Weidmann explained.

Diversity of opinions important

Mr Weidmann also emphasised the importance of having a diversity of opinions on the Governing Council. He said it was especially important to look at data, concepts and potential viewpoints as holistically as possible where uncertainty about future developments is particularly high. “Looking at the global and the euro area economy, it is abundantly clear that we are in such a period of uncertainty”, the Bundesbank President said. According to Mr Weidmann, what the ECB Governing Council needs is experience and independence of judgement. This, he said, was crucial in ensuring that a decision reached by a group was superior to that of an individual. He was sorry to note the resignation of Sabine Lautenschläger, adding that her voice was an asset to the Council and would be missed. Mr Weidmann pointed out that “the diversity of opinions and perspectives on the Council was always a strength, not a weakness.” Ms Lautenschläger, Member of the Executive Board of the ECB, will resign from her position on 31 October 2019.