Thursday, December 06, 2007

Split in ECB Council?

Interesting Bloomberg News article about how the ECB council is likely split between hawks and doves who want to change interest rates in opposite ways. Spaniard Jose Manuel Gonzalez-Paramo has publicly hinted relatively imminent rate cuts, while German (of course) Axel Weber has argued for rate increases. Most likely, the board is split between members from countries that traditionally had inflationary monetary policies, such as France, Italy and Spain and countries that have had relative hard money policies such as Germany and Holland.

This likely means that the compromise of keeping interest rates on hold will be kept in place indefinitely until either the global financial distress disappears or inflation falls back significantly. Neither of which is likely in the coming 6 months, and probably even longer.


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