FRANKFURT (Reuters) - German growth remains on track despite a small drop in output last quarter but its increasingly visible constraints make the need for monetary policy normalisation even more clear, Bundesbank President Jens Weidmann said on Wednesday.
Germany GDP dropped by 0.2 percent last quarter, data showed earlier on Wednesday and Weidmann said the fall was due to a one-off weakness in the car industry as it struggled to adjust to new emission testing requirements.
“The up and down fluctuations in the numbers should not distract us from the fact that the economic upturn in Germany and the euro area remains intact,” Weidmann said in Berlin.
But he noted that capacity constraints and a tight labour market create bottlenecks for the economy, making further growth difficult.
“This why it is also clear the road back to monetary policy normalisation should not be unnecessarily long,” Weidmann, who sits on the European Central Bank’s Governing Council, said. “We should not take lightly the risks and side effects of extremely loose monetary policy.”
Reporting by Balazs Koranyi; Editing by Maria Sheahan