German hawk counters European doves (again)

German hawk (Bundesbank chief Jens Weidmann) today in his speech took on the European doves (ECB president Draghi & executive board member Peter Paret) again discarding the fear over deflation.

Mr. Draghi and Paret (both known doves) in their respective speeches highlighted that -

It is time for decisive action to counter threat of deflation, highlighting concern over low headline as well as core inflation. While Paret called for united ECB policymakers, Draghi said to do whatever we can in next meeting.

Though Bundesbank chief has only one vote among 19 policymakers and majority will prevail, his views are of great importance since Germany is the largest key capital contributor to European Central Bank (ECB).

According to Mr. Weidmann,

• Lower oil price, which is key element, feeding deflation in Europe, is more of a stimulus. Lower oil price reduces energy bills of both households and businesses, which frees up more money for consumption, investment and for debt reduction.
• On the core inflation concern, he pointed out that it is a medium term concept and current at 1%, which he expects to move up gradually.

Euro is currently trading at 1.067 against Dollar.