It is like a monetary mantra, and ALL the European Central Bankers chant it: we have but one compass needle for our policies and that is price stability.
It is the ECB's mandate, credo and conviction that only an inflation-free (inflation-free in ECB speak is a rise in consumer prices of no more than 2 percent) economy is a healthy economy and that price stability is the best guarantor for economic growth and prowess. Let's face it: there is more than a grain of truth in this.
But while ECBankers chant the anti-inflation mantra, there is no denying that SOME chant it more fervently than others.
And the most zealous disciples in the mission to fight inflation are traditionally ECB council members from Germany. After all, Germany's central bank, the Bundesbank, has fought many a crusuade against the hordes of rampant inflation in its time. The defenders of deutschmark did it in pre-euro times and have certainly not slackened in their conviction.
So it's no surprise that today's Bundesbank President Axel Weber counts as one of the interest-rate hawks. When I talked to him Tuesday, he pretty much crushed any hopes for a swift rate cut by the ECB.
"The persistently high pressures on prices (meaning upwards, of course) leave no room for monetary easing," so Weber said in plain enough English (well, in German actually, but THAT'S what it meant).
Now, what about a time frame for this? Of course, any central banker would be ill-advised, nay, downright reckless to "pre-commit" on monetary policy moves. And Weber is neither. But he WAS talking in the context of economic and price projections for 2008. So, draw your own conclusions.
Certainly looks like the ECB hawks have dug themselves in are going to resist a rate cut for a while yet, provided the euro-zone economy doesn't collapse (which, if recent data are anything to go by, doesn't seem likely).
Behind closed doors and off the record, one may see many a European central banker frown at the way the Fed is pumping money into the U.S. banking system (and with it into the global financial flows, of course)
"Another disaster waiting to happen," is what I have heard. Alas, I tend to agree. But, honestly, IS there an alternative?
Not to mention the nagging, sinking feeling of "too little, too late." Giving the system enough liquidity is one thing, giving confidence back to the system another. Maybe the EBC HAD the better strategy, just nobody in the US markets was prepared to listen. A crying shame, too, that Ben Bernanke and his merry men were chased by frantic markets from one rate cut into the next.
And yet, we may all only hope that the Fed strategy does work in the end and turn the Titanic of global markets away from that deadly iceberg ... So watch this space! And I daresay, in the meantime, many an investor will continue to scramble into the lifeboats.
Hey, wasn't it always women and children first? Phew, lucky for me, eh?
Ciao for now and keep a life jacket handy, eh? Just in case.
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