5 April 2001, 21:32 GERMANY'S EICHEL PRAISES U.S. FED'S MONETARY POLICY>
BERLIN (MktNews) - German Finance Minister Hans Eichel Thursday
praised the monetary policy of the U.S. Federal Reserve, noting that it
had backed U.S. growth in the last ten years.
While not mentioning the European Central Bank directly, Eichel's
remarks are a clear signal that the German federal government would like
the ECB to cut rates at its next meeting on April 11 to boost the
rapidly weakening German economy.
While no one is able to quantify the exact impact of the U.S.
monetary policy, "in principle everybody agrees that the monetary policy
of the United States has favoured (economic) growth," Eichel said in the
text of a speech in Cologne made available here.
"A monetary policy that appears to be expansive at first glance can
be just right for higher production potential," he added.
Eichel also emphasized that the United States has achieved high
growth rates in recent years "without remarkable inflationary
pressures."
Eichel's remarks were the second today on monetary policy. Earlier
this afternoon, he said that central banks must bear in mind the
weakening of global growth and the easing of inflation risks when they
set their monetary policy decisions.
Most private forecasts now expect German growth to slow from 3% in
2000 to 2% or less this year, well below the federal government current
2.6-2.9% forecast. This, in turn, will cut tax revenues even as spending
for unemployment and BSE/foot and mouth is rising, boosting the
government budget deficit by as much as DM20 billion above the federal
government's current DM43.7 billion target and raising the government's
market borrowing requirement.
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