GERMANY’S central bank will boost the government’s coffers by €4.6bn (£3.84bn) this year, announcing a significant profit in its annual report yesterday, up from €664m last year.
The Bundesbank also warned the European Central Bank (ECB) not to stray from its inflation target, despite “controversial decisions” since the Eurozone crisis.
The currency union has an official target of inflation of close to but below two per cent, but inflation has regularly fallen below that level in recent months, sparking concern.
The document says it is “crucial to ensure” that the euro area’s policy is “unambiguously focused on its primary objective of ensuring price stability”.
It added: “The longer the low-interest rate environment persists, the more challenging the eventual exit from non-standard monetary policy measures becomes,” citing the US Federal Reserve’s tapering efforts as an example.
In a speech yesterday, hawkish Bundesbank boss Jens Weidmann said that there was little risk of deflation throughout the Eurozone, but that the ECB could still use unconventional monetary tools if they were necessary.
Weidmann also echoed the sentiment of the annual report in his comments on rates, saying: “Low interest rates cannot become a permanent state,” suggesting that low rates would hold back structural reform programmes in European countries.