22 August 2001, 14:35 Germany Press:Wise Man Urges ECB To Raise HICP Target Over 2%
BERLIN (MktNews) - The European Central Bank (ECB) should raise its
inflation ceiling above the current 2% level to take into account
structural price effects, Bert Ruerup, a member of the German federal
government's council of independent economic advisers, known as the
"five wise men," said in an interview Wednesday.
"If monetary policy does not take into consideration structural
price effects, then it might easily become too restrictive and dampen
growth and employment," Ruerup warned in an interview to be published in
Thursday's edition of Germany's weekly Die Zeit.
The ECB's current definition of price stability is maintaining the
annual harmonised consumer inflation rate below 2%.
Earlier this year, Bundesbank Central Council member Klaus-Dieter
Kuehbacher and Ifo Institute President Hans-Werner Sinn also urged the
ECB to raise its inflation target. Sinn argued that the 2% target was
too low given past Bundesbank practice and that a 2.5% limit was more
appropriate.
In other comments, Ruerup called for a change in the composition of
the ECB's policy making Governing Council. In future, only big countries
should have permanent representatives on the panel, while
representatives of smaller states should share remaining positions on a
rotating basis, Ruerup said.
Ruerup also backed the call by European finance ministers to allow
for budget deficits in some eurozone countries to temporarily exceed
targets under the fiscal Stability Pact.
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