The euro zone is not in a deflationary cycle and the European Central Bank (ECB) should not overreact to a slowdown in inflation caused largely by cyclical factors which should prove temporary, Bundesbank President Jens Weidmann said on Saturday.
The comments from the head of Germany’s central bank, also a member of the ECB’s governing council, run counter to remarks last week which investors interpreted as a softening of long-held German resistance to more radical action to support growth.
The ECB is running official interest rates at a record low but unlike other major central banks has resisted calls to follow that move with outright “quantitative easing” to pump more money into the economy.
