fundamental alert

Bundesbank President Axel Weber Remains Focused On Growth, Expects Economic Activity to Slow Further as Crisis Deepens

Monday, 17 November 2008 10:22:16 GMT  |  DailyFX Research

ECB's Weber said he doesn't rule out further rate cuts and added that the central bank will meet weaker growth with appropriate steps. The comments support expectations for another rate cut at the December council meeting. However, Weber also warned that low rates are an incentive for high risks, which ties in with comments from executive board member Stark, who has warned that excessive easing could lay the ground for new excesses in the future. Weber said the crisis has broadened and intensified and that he is not optimistic on fourth quarter growth and sees lower growth potential in the future.
In addition, Weber said an unstable financial system threatens price stability and sustainable growth. The Bundesbank president warned against knee-jerk regulation and said that more regulation doesn't necessarily mean better regulation, but also said that the Bundesbank's financial stability role should be law. Weber also said that the belief in the market ability to self-regulate was waned.

Meanwhile, ECB's Noyer said interbank markets are showing the first signs of normalization, but added that "there is still some way to go". Noyer also said that the global financial system has been in crisis for more than a year and that the crisis is not over yet. The French central bank head said French banks "aren't sheltered from the crisis", but stressed that they are "solid and robust" and continue to make profits and have "regular sources of revenue". He expressed hope that lower oil and food prices will increase real disposable income, which could contribute to a possible revival of consumption and investment and ultimately "allow a pickup in growth in the course of 2009.

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