Tietmeyer keeps rate hopes alive

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The Independent Online
FRANKFURT - The Bundesbank sought yesterday to keep alive hopes of a further German rate cut, writes John Eisenhammer.

Because recovery had begun in Germany much later than in the US or Britain it had not definitely reached the point where tighter monetary policy was required to counter inflation, said Hans Tietmeyer, the bank's president.

The direction of any change in German key rates remained open, he said. At the moment they were at an appropriate level.

'They take into account uncertainties in the field of finance as well as money supply developments, volatility in world financial markets and a declining rate of inflation,' Mr Tietmeyer said.

The Bundesbank would wait to see money supply figures for September, and perhaps October, before making a new rate decision, he added.

Taking a more optimistic view than previously, the Bundesbank president said M3 money supply growth might yet come down to within its 4 to 6 per cent growth corridor for 1994. Analysts have forecast a slowdown in M3 expansion in September to between 6.9 and 7.5 per cent, after growth of 8.2 per cent in August.

Inflation has remained stubbornly at 3 per cent in recent months but Mr Tietmeyer saw good chances of further reductions in the rate of price increases.