Thursday, April 06, 2006

The ECB Will Not Raise Rates?

Given the high level of money supply and credit growth in the Euro-zone, the fact that consumer price inflation remains well above the supposed 2% ceiling and given the fact that all indicators imply that the Euro-zone is in a cyclical upswing, a interest rate increase next month seemed like a sure bet.

Yet today ECB chief Jean Claude Trichet went out of his way to make it clear that there wont be any rate hike next month. When even the last excuse for not raising rates, the weak economic growth in Europe have been removed, one can ask just what he is waiting for. If this is not a time to normalize the artificially supressed rates, then it seems like there will never be any time for that.

One thing is for sure, however. By waiting, the ECB is following the mistakes of the Federal Reserve and creating increasing economic imbalances that in time will mean big trouble for Europe.


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