ECB’s Weidmann: Upside Risks Dominate in Germany and Eurozone

European Central Bank governing council member and Bundesbank head Jens Weidmann said on Wednesday that upside risks to inflation dominate in both Germany and the rest of the Eurozone.

The flexibility of the PEPP should not be transferred to any other bond-buying programme, Weidmann continued, adding that the ECB should not lock in ultra-easy policy settings for long given elevated inflation uncertainty.

On inflation, Weidmann warned that inflation will peak near 6.0% in Germany and only fall back below 3.0% at the end of next year.

Weidmann also said that Germany’s 2021 growth is likely to be significantly lower than the Bundesbank June forecast, with the recovery instead pushed further out. Companies’ complaints about labour shortages have increased particularly in Germany, but also among its European neighbours, Weidmann added.

In the future, he continued, tensions in the labour market could make it easier for employees and trade unions to push for noticeably higher wages.