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.