BUNDESBANK AIMS FOR TIGHT MONEY POLICY - SCHLESINGER
The Bundesbank is trying to keep
monetary policy tight in order to counter inflationary
tendencies, Bundesbank Vice-President Helmut Schlesinger was
quoted as saying.
    "We are trying to keep the monetary framework tight, so that
inflationary pressures cannot develop," he told the Frankfurter
Neue Presse daily in an interview.
    "Central bank money stock does not have to be reduced
because of this, but it must continue to grow modestly," he
said.
    Bundesbank spokesmen were not available for comment.
    On Thursday Schlesinger said in a contribution to the
Handelsblatt daily that the accommodative monetary stance in
West Germany caused by outside pressures could not determine
policy in the long term.
    The improvement in West German terms of trade, providing
room for non-inflationary expansion of domestic demand in
excess of output growth, put the overshoot of central bank
money stock in a more positive light, he said on Thursday.
    Central bank money stock, the Bundesbank's main monetary
measure, was growing at an annual rate of 7.3 pct in March,
above the 1987 three-six pct target range.
    Money stock overshot the 3.5-5.5 pct 1986 growth target.
    Schlesinger told the Frankfurter Neue Presse that the phase
of falling prices was over in West Germany.
    Prices might still be lower on a comparison with their
level one year earlier. But the cost of living index has risen
to 120.7 in March from its November 1986 low of 120.0,
expressing a slight rise in prices, Schlesinger said.
    In March the cost of living was steady against February but
0.2 pct below March 1986.
    Schlesinger said a rise of between one and 1.5 pct during
1987 would be acceptable, and effectively mean price stability.
    Agreements so far in the current West German wage round are
neutral as far as inflation is concerned because of the
strength of the mark, Schlesinger said.
    Wage agreements in the public service and engineering
industry were relatively high in view of the stable cost of
living. But the higher costs would be compensated for, he said.
    "I am thinking above all of the fact that in the course of
this year we will in all probability have a stronger mark
against other currencies than last year," he said, adding
"Without this mark revaluation effect, we would have had to say
that the wage rise agreements were not neutral for prices."
    Schlesinger said exchange rate movements had increased the
scope for redistributing wealth this year, but this development
was unlikely to continue in 1988.
    "For this reason I cannot comment on that part of the
engineering agreement which covers the coming years," he said.
    Some 2.3 mln workers for the public services received a 3.4
pct pay rise from January 1. An agreement for four mln
engineering workers raised pay by 3.7 pct from April 1, and
then raises pay by another two pct from April 1, 1988 and by
2.5 pct from April 1, 1989. The engineering agreement also cuts
the working week by 1-1/2 hours to 37 hours in two stages.
 REUTER
