ECB's Weidmann: Saw No Immediate Need for QE

        LONDON--There was no urgent need for the European Central Bank to embark on a program of quantitative easing, since the current decline in inflation rates is temporary and it isn't having a negative effect on the broader economy, ECB Governing Council member Jens Weidmann said in remarks Thursday.

        According to the text of a prepared speech here, Mr. Weidmann said that ECB rate-setters face a tough task but that he felt "there was no immediate need for this particular measure," referring to the ECB's purchases of government bonds, known as QE.

        "What we are currently seeing is a disinflationary process, not a deflationary spiral of decreasing prices and wages," he said. "The risk of self-reinforcing deflation is still considered to be very low. And this is not only my assessment, but that of most other Governing Council members, too."

        "One of the main drivers of disinflation is the sharp fall in energy prices, a factor that is expected to be transitory in nature," he said. "Hence, all the economic forecasts predict that inflation rates will rise over the medium term, albeit at a rather sluggish pace."

        "Without any signs of second-round effects--and I do not see any--monetary policy need not take any steps to counter the potentially short-lived effect of lower oil prices on consumer prices," he said.

        His comments suggest a certain split among ECB rate-setters on how the ECB should react to lower oil prices. Earlier Thursday, ECB chief economist Peter Praet said the ECB couldn't "take the luxury to look through and say this is just oil prices," and wait to look at second-round effects. The reason for this, he said, was that when oil prices fell, inflation expectations were already fragile.

        "The decline in oil prices works more like an economic stimulus for the euro area than a harbinger of imminent deflation," said Mr. Weidmann.

        Mr. Weidmann, who heads Germany's Bundesbank, has long been a critic of buying government bonds, a move that is viewed very critically in Germany, where it is thought to be inflationary and beyond the mandate of a central bank.

        The Bundesbank president underlined concerns that sovereign-bond purchases by the ECB would undercut reform efforts in Europe. "I am worried that sovereign-bond purchases will undermine structural reforms and budget consolidation in euro-area countries, especially if the impression were to emerge that the central bank is stepping in to take the place of effective policy action time and again," he said.

        He also stressed that Greece can only continue to get support from its eurozone partners if it sticks to agreements it has already made. "Greece will continue to need support, but support can only be given if the agreements made are complied with," he said.

        Providing the embattled country with further debt relief wouldn't change its liquidity situation very much, he said. "But any further relaxation of the agreed targets would be counterproductive to efforts to regain investors' confidence in Greece's debt sustainability."

        Write to Todd Buell at todd.buell@wsj.com

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        (END) Dow Jones Newswires

        February 13, 2015 01:50 ET (06:50 GMT)

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