'It is clear that the change in problems leads to a change in solutions,' Mr Schlesinger said. 'Someone who you might have called a hawk before might be called a dove in the current context'.
His remarks came despite figures showing inflation continuing to rise slowly in western Germany. However, the Bundesbank signalled that this was no longer held to be an important obstacle to further interest rate cuts.
The mark shrugged off Mr Schlesinger's comments to finish the day 0.30 pfennigs up in London at DM2.4972 to the pound. It lost ground against the dollar, which rose 1.40 pfennigs to close at DM1.5805.
The cost of living in western Germany rose 0.3 per cent in April from March, and was 4.3 per cent above the April 1992 level, according to provisional figures released by the Federal Statistics Office yesterday.
Contrary to expectations, inflation has risen steadily in the first four months of this year despite the severity of the downturn. The push has come almost entirely from administered price rises, such as rents and municipal services. The Bundesbank's vice-president, Hans Tietmeyer, played down inflation as a 'lagging indicator' that would necessarily decline in the coming months.
Although the Bundesbank continues to describe inflation as 'unacceptably high' and insists that there has been no shift from its medium-term goal of getting inflation down towards 2 per cent, the obviously co-ordinated comments from several members of the bank's central council over the past two days indicate that a combination of greater acceptance of the distorting effects of the administered price rises in the inflation figures and alarm at the weakened state of the economy has produced an important shift in assessment.Reuse content