Predictions of German Recovery Premature Economic Think Tanks Say Bundesbank Must Focus More on Growth Than on Inflation

Article excerpt

RECENT economic setbacks are dashing hopes for a German recovery in the first half of 1994, while criticism mounts about the Bundesbank's monetary policies.

Several economic think tanks are calling for the Bundesbank, Germany's central bank, to lower interest rates in the hopes of stimulating growth. But the Bundesbank - widely seen as the manager of Western Europe's economy - is resisting. Watching for inflation

Bank officials say a decision on interest rate levels is on hold until a clearer picture on inflation emerges. "We do not want a change in our policy now and in the foreseeable future," Bundesbank president Hans Tietmeyer told journalists. The German money supply grew at an annualized rate of 7.2 percent in November, far beyond 1993's target limit of 4.5 percent to 6.5 percent, the bank said. Money supply growth is one source of inflation.

Early last week, Economics Minister Gunter Rexrodt was predicting the imminent start of a robust recovery, and one Central Bank board member hinted at a significant fall in interest rates.

The optimism quickly faded, however, after a blitz of bearish economic developments. On Wednesday, the Federal Labor Office announced that unemployment had reached its highest level - 3. …


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