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ECB must keep monetary policy easy for inflation to pick up: Bundesbank

FRANKFURT (Reuters) – The European Central Bank must maintain an easy monetary policy if inflation in the euro zone is to pick up, the deputy head of the Bundesbank said on Thursday.

Claudia Buch’s comment signaled how the German central bank was gradually easing its opposition to the ECB’s aggressive stimulus policy of negative interest rates and massive bond purchases in the face of sluggish price growth.

“In light of the forecasts, it is…clear that monetary policy needs to continue to provide support for inflationary pressures in the euro area to consolidate sufficiently,” Buch told an event in Cologne.

She repeated, however, the Bundesbank’s long-standing concerns that the ECB’s purchases of government bonds risked blurring the boundaries between monetary and fiscal policy, while low interest rates could tempt investors to take more risks than they can bear.

Buch was standing in for Bundesbank president Jens Weidmann, the bank’s representative on the ECB’s policy-making Governing Council, who was unwell on Thursday and could not attend the event in Cologne.

(Reporting By Francesco Canepa; Editing by Kirsten Donovan)