president of the German Central Bank (Bundesbank) Jens Weidmann arrives for a G7 summit of Finance Ministers in May. Photo: AFP/Filippo Monteforte

European Central Bank President Mario Draghi declined to say anything of interest regarding the bank’s monetary policy last week in Jackson Hole, but the leading candidate to replace him didn’t hesitate to give some signals in his stead.

Bundesbank President Jens Weidmann, also a member on the ECB Governing Council, said in an interview last week that an exit should be swift:

You can deduce from my view that government bond purchases should only ever be regarded as an emergency tool that I would be prepared to accept a less expansionary monetary policy stance and thus a slightly slower return towards 2 % inflation, and that I would make the exit swift.

Weidmann went on to qualify the “swift” statement, acknowledging that tapering would need to be gradual:

The question of whether there is any need for further monetary policy action should be considered in isolation from what an exit should look like. We are all in agreement that the purchase programme should not be ended overnight. To effect an orderly exit that does not cause needless turmoil in financial markets, it would be necessary to gradually taper the programme, supported by appropriate communication.