Why The ECB Needs To Go For 50
The case for raising by 50 basis points is really owerwhelming. As I pointed out in a recent post money supply and private sector debt growth have increased to record high levels, while consumer price inflation have risen to 2.5%. Moreover, as is pointed out in a Morgan Stanley comment on the issue, producer price inflation have risen to 5.4%
while inflationary expectations have risen sharply. Even so-called "core" consumer price inflation have accelerated recently.
In the latest Credit Bubble Bulletin from Prudent Bear, it is also reported that house price inflation 'continues to be unreasonably high in Ireland, where prices rose 1.4% the last month and 13.2% over the last 12 months, with prices now being on average nearly €300,000.
And with falling unemployment and above trend growth, even the "weak economy excuse" is now removed.
The ECB have already done enough damage by keeping short-term interest rates negative in real terms for more than two years and then raising them at a snail's pace. Continuing to drag its feets over this issue by only raising a measly 25 bp will only further aggravate the imbalances this policy have already created.