EMU Inflation Rises to 2.6%

Little more than a month ago, I predicted that Euro area inflation would easily rise to at least 2.5% by October or November this year from the 1.7% in August. Now, the flash estimate of euro area inflation indicates that it rose to 2.6% in October.

Yet even with inflation clearly above the ECB:s official ceiling of 2% and money supply growth way above the ECB:s official target of 4.5%, they are not expected to raise any more. All because the cowardly Frenchman, Jean-Claude Trichet, in charge isn't man enough too defy the monetary crank ruling in Paris, Sarkozy. Anyone who considers the ECB to be inflation hawks should really have their head examined.

This also illustrates again why we can't rely on written rules to restrain government officials. Just as most U.S. politicians -with very few exceptions, like Ron Paul- and most U.S. supreme court justices -with again very few exceptions, like Clarence Thomas- openly defy the U.S. constitution, so do the ECB board ignore the inflation targets they are supposed to follow. And this is not just true right now, money supply growth have exceeded 4.5% every single month since 1999 and consumer price inflation have exceeded 2% most of the time.