BUNDESBANK DEFENDS STRICT MONEY POLICIES

BUNDESBANK DEFENDS STRICT MONEY POLICIES

The Bundesbank must continue its anti- inflationary, stability-oriented monetary policies using the control of money supply as its medium-term goal, Helmut Schieber, Bundesbank directorate member, said Monday.

In a speech prepared for delivery to the city planning institute in Bonn, Mr. Schieber said the Bundesbank must "pursue its money supply targets unswervingly to return to monetary stability as soon as possible."Only monetary stability will maintain savers' trust and safeguard capital formation with long-term low interest rates, Mr. Schieber said.

Low capital market rates are especially important for Germany as it shifted to a capital exporting from an importing nation after German unification.

Since April, German money supply growth has exceeded the Bundesbank's 1993 growth targets of 4.5 percent to 6.5 percent. In October, M3 money supply grew a provisional 6.8 percent on an annualized, seasonally adjusted basis from fourth-quarter 1992.

M3 includes cash in circulation, sight deposits, time deposits under four years and regular savings accounts. The average yield on German public issues was at 5.59 percent Friday.

While there had been widespread calls throughout 1993 for quicker rate cuts to stimulate economic recovery and stabilize the European Monetary System, Mr. Schieber said, "the Bundesbank must remain hard," not giving in to these calls.

Western German November annual inflation slowed to a provisional 3.7 percent, compared with October's 3.9 percent annual rate. On Dec. 2, the Bundesbank left key rates unchanged but cut the securities repurchase agreement (repo) rate to 6 percent from 6.25 percent by setting a weekly fixed-rate repo through Jan. 5. The discount rate remains at 5.75 percent and the Lombard rate at 6.75 percent.