Bundesbank President Jens Weidmann has warned against ignoring the uncertainty surrounding future price developments. “We also need to keep an eye on the risks to the price outlook. In my view, the risks are tilted to the upside right now,” he said at the Bundesbank symposium “Banking supervision in dialogue”.

The Bundesbank assumes that inflation rates in Germany will continue to rise. Its experts write that, as things currently stand, inflation rates of between 4% and 5% will be possible at the end of the year. Inflation is then likely to stabilise again to a marked extent in early 2022, but could remain above 2% up to mid-2022.

Bundesbank President Jens Weidmann has once again called for monetary policy in the euro area to be normalised when the inflation outlook calls for it. In an interview with the German Sunday newspaper Welt am Sonntag, he said he wouldn’t rule out higher inflation rates either. “In any event, I will strongly recommend keeping a close eye on the risk of an inflation rate that is too high and not only on the risk of one that is too low,” he commented.

From the point of view of Bundesbank President Jens Weidmann, the ECB’s new inflation target of 2 percent is neither a move towards significantly higher inflation rates nor a dramatic change of course. He does not see central banks as having the type of influence over the economic process that would enable them to steer inflation rates with pinpoint accuracy to the nearest decimal place. “That’s why a slight, temporary overshooting of the 2 percent target is just as unavoidable as a slight, temporary undershooting”, he said in an interview with the German daily newspaper Frankfurter Allgemeine Zeitung. “This isn’t a problem, and is something we agreed on as part of the strategy”, noted Mr Weidmann.