Thursday, July 28, 2011

Is the ECB Reading the Signs?

by Terence Roth

Wall Street Journal

July 28, 2011

This week brought more signs that the euro zone could be heading for a stall – or even a contraction – by the end of this year. It also brought signs of confusion from the European Central Bank, which as of May has been busy pushing up interest rates even as markets worry about a new recession and another credit crisis.

When translated by some media outlets, this came out as “very strong vigilance.” And that, as every ECB-watcher knows, The ECB’s policy-signalling turned comic this week when board member Christian Noyer said in a French newspaper interview that the ECB must continue to pursuue “ tres grande vigilance” on inflation.

This is code red for an imminent hike in the ECB’s official interest rates. ECB chief Jean-Claude Trichet used the “”strong vigilance” expression just prior to each of this year’s increases in interest rates.


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