Otmar Issing, the bank's chief economist, said yesterday: 'It is positive that there is an agreement, that the uncertainty is over.' Reimut Jochimsen, another council member, expressed 'great relief' that the months of debilitating haggling had passed.
Helmut Schlesinger, the Bundesbank's president, had earlier described the ending of the negotiations in Bonn as very important for the German economy and investor confidence.
The establishment of a medium-term plan for securing public finances, under massive strain because of unification, had widely been regarded as the Bundesbank's main outstanding condition for a further relaxation in rates.
With the recession biting hard, inflation is expected to continue sinking slowly, and monetary growth to be weaker. 'The Bundesbank has probably now got the scope it needs to act,' said Hermann Remsperger, chief economist at BHF bank.
However, a possible complicating factor is Sunday's general election in France, given that a rate reduction would boost the franc, and the Bundesbank would not wish to be regarded as interfering. But the domestic pressure for rate relief is now so strong that such external considerations are thought likely to play only a secondary role.