FRANKFURT, Germany (AP) – A prominent member of the European Central Bank’s monetary policy council is warning about the risks of excessive stimulus and leaving interest rates too low for too long.
The remarks Wednesday from Jens Weidmann, who also heads Germany’s national central bank, come ahead of a crucial March 10 meeting where the ECB will consider ramping up its stimulus.
Weidmann warned that side effects from prolonged periods of easy money and low rates “would be dangerous to simply ignore.”
He said long periods of low rates erode bank profits and make it harder for them to pass on the central bank’s stimulus to customers. And he said eurozone governments were not using the breathing space afforded by the stimulus efforts, which are keeping government borrowing costs low, to reduce their budget deficits.
Weidmann is just one member of the 25-member ECB governing council that sets monetary policy for the 19 countries that share the euro currency. But he has added clout because he comes from the eurozone’s largest member, Germany, and has been a leading voice among stimulus skeptics on the council.