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August 5th 2005

Will the ECB ever lower rates?

European politicians, desperate to deflect negative attention, have repeatedly blamed the European Central Bank (ECB) for the economic woes of EU members. They argue that the ECB is unnecessarily targeting inflation, when it should be stimulating growth. Is the ECB responsible for the lackluster growth of the EU, and should it lower rates? The answer to both questions is ‘maybe.’ Tight fiscal policies and a strong Euro deserve at least some of the blame. The problem, argues one analyst, is not with the ECB’s monetary policy, itself, but rather the way in which it is communicated to the public. There is a fundamental lack of transparency and clarity in central bank decision making, which has the unintended consequence of confusing investors and consumers. The Economist reports:

While the ECB’s prime task is price stability, it is also legally charged with supporting growth. Last year it could have cut interest rates to offset the impact of the rising euro; today it should stand ready to ease monetary policy to cushion the impact of structural reform and fiscal discipline.

Read More: Less bashing, please

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Posted by Adam Kritzer | in Central Banks, Euro | No Comments »

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