To measure the rate of inflation and determine monetary policy, the U.S. Federal Reserve and the ECB does not scan exactly the same statistics. Indeed, while the former prefers to analyze the rate of inflation excluding energy and food - by definition volatile - the European bank takes the figure in its entirety. While the consumer spending also performs on food and energy but also crucial decisions built on underlying fluctuating also maintain a sense of instability and a context quite unhealthy.
Summer 2008 - marked by soaring oil prices - offers a perfect illustration of this difference in approach has been ECB to raise rates while the Federal Reserve continued to share its cycle of decline began a year earlier. In fact, the Fed does not scrutinized as the general index of the inflation (which had risen sharply) data excluding energy materials (which remained unchanged), or inflationary expectations of consumers and businesses (which were them in full deceleration). A rise in U.S. rates in this pivotal time - we remember the debacle a few weeks later in September 2008 - would have repeated the mistakes cataclysmic 1929 and this is only through analysis of indexes excluding food and energy than the United States were able to avoid falling into this trap.
The context is very different today - apart from the financial crisis that seems indeed behind us - as Jean-Claude Trichet prepared markets yesterday to lift a forthcoming (next month) rates in Europe. His "extreme vigilance" - words could not be more explicit employees yesterday during his press conference - vis-à-vis price stability is indeed motivated by substantial price appreciation in the European production was up by 1.5% over one month and ... 6.1% from last year! Seemingly indisputable, this inflationary - even though the resulting energy prices passed on by producers to consumers - but the causes of the Pavlovian reaction unorthodox ECB brandishing the specter of rising rates. And even if the next rise in European interest rates seems little justification for our current situation is far from suffering an inflationary spiral, soaring energy costs being actually not a sufficient factor to stoke such fears. With an average unemployment rate in the EU just under 10%, so it is absolutely impossible that European wages are increased and therefore they exert an adverse effect on price stability ...
In reality, c ' is the situation in Germany - and the demands of the leaders of this country - who are one step up the voltage to the ECB: Having indeed a sharp decline in unemployment to 6.5% of its population (compared to 7.3% per last year), Germany is thus very likely to have very soon adjust (upwards of course) his wages in the relatively near future. In other words, European interest rates will be reassembled next April despite the suffering nations of Europe who suffer peripheral hit hard by a worsening of their funding costs in order to calm the obsessions of the Weimar ' Germany ... The whole process of re-balancing and remediation of affected countries will be mortgaged to avoid Germany in the adverse effects of an increase in wages.
Having launched - the cons German recommendations - in rescue operations consisting redeem the Treasury bonds weakened European countries, the ECB therefore attempts to appease Germany by offering them satisfaction on the frontline of the fight against inflation its internal threats.
Michel Santi - Economist - www.gestionsuisse.com
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