FRANKFURT (MNI) – Central banks’ growing role in macoprudential
surveillance must not dilute their primary mandate for price stability,
ECB Governing Council member Jens Weidmann said Monday.
Moreover, the exceptional liquidity measures adopted during the
financial crisis should be unwound as soon as possible to avoid
distortions, the president of the Bundesbank told a conference here.
“The primary goal of central banks is to assure price stability,”
Weidmann said. “There must not and will not be compromises. And to
assure this, there must be a clear separation from the responsibilities
of financial policy.”
At the same time, central banks can contribute to financial
stability by leaning against the wind, assuring policy symmetry over the
course of the financial cycle and maintaining a medium-term policy
horizon, he said.
“While fluctuations in the finance system can be dampened this way
by monetary policy — as a by-product of stability-oriented monetary
policy — they cannot be entirely prevented,” Weidmann said.
Among the “many” distorting effects of unconventional monetary
policy measures, the Bundesbank president cited the danger of
encouraging risky investments or blocking necessary restructuring in the
banking system. “Propping up individual banks is clearly the
responsibility of governments,” he said.
“Therefore, exceptional monetary policy measures must be promptly
unwound as markets recover, so that they do not themselves hinder the
return to normal conditions,” he said.
While welcoming the participation of central banks in macro
surveillance, Weidmann cautioned that this must not jeopardize their
independence. Otherwise, this could give the impression that monetary
policy might succumb to pressure for an accommodative stance during
crises in order to assure financial stability.
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