Thursday, March 3, 2011

ECB Monetary Policy Could Lead to EU Stagflation

Following today's meeting of the European Central Bank, ECB President Jean-Claude Trichet signaled that an increase in official interest rates next month "is possible".

Trichet warned that risks of inflation in the euro zone "are to the upside" and that "strong vigilance" is required.

Coupled with this recognition that price inflation is about to heat up, Trichet also said that the ECB will continue to lend as much as euro-zone banks want for at least another three months. Thus, the Euro sector appears to be moving in the same direction as China, some efforts are being made to slow price inflation, but a lot of money printing continues.

This confused monetary policy of attempting to have your cake and eat it, also, will lead to stagflation both in the EU and China.

1 comment:

  1. No one has commented on the German demand that Ireland raise its corporate tax structure to equalize corporate taxes with the rest of the EU. Nothing like a good jobs destroying business tax to keep the machine going.
    Great job, Merkel. Now go home.