FRANKFURT (MktNews) - The European Central Bank (ECB) should keep official interest rates on hold for the time being despite the slowdown in German and eurozone growth, Wolfgang Wiegard, the newest member of the government's independent council of economic advisors said in an interview with German weekly magazine Focus Money.
"The ECB should not cut interest rates now", Wiegard said. Despite slower growth in Germany and the eurozone the situation "gives no cause to think about lower interest rates," he said according to a summary of his remarks released Wednesday prior to publication in the magazine's Thursday edition.
Lower interest rates endanger price stability, warned Wiegard, an economics professor at Regensburg University who joined the government's economic advisory council in March. Eurozone inflation was 2.6% y/y in March. It has been above the ECB's 2% target since June last year.
The ECB must first build up a reputation, Wiegard said. "You don't build a reputation with actionism, but with a steady hand policy."
These remarks by Wiegard, who was appointed to the independent advisory council by the current center-left government, underscore a change in emphasis in the stance of some left-leaning politicians and economists in Germany.
In the past, these have generally called for lower interest rates during periods of economic slowdown regardless of inflationary pressures. This change could be related to population aging -- less people depend on employment to generate income -- and with the increased importance of savings.
The ECB is the only major central bank not to cut interest rates this year. It currently has a minimum bid rate for its refinancing operations of 4.75%. It's last interest rate move was a 25 basis point hike on October 25. It's next interest rate decision is due on Thursday at 1145 GMT.