Big news. I mean really big, 0.75 is some kind of a step. Now back to the charts to see what the market think about it
I wonder who looks more like a moron now? Jean-Claude "Inflation expectations are still too high" Trichet or Mervyn "No rate cuts until 2010" King? Boy were these guys wrong. In comparison, Bernanke looks like a super genius.
How can you say that when this whole problem was created by inflation in the first place? This so called "headline" inflation thats apparently not important is what drove us into a recession.
How can I say this? Japan hiked rates in 1989 before their bubble burst and then waited way too long to cut rates leaving them in a 28 year long maelstrom of anemic economic performance. Inflation is always a lagging indicator, it's not forward looking. Bernanke learned his lesson from the Japanese. King and Trichet didn't and now they will have to pay the price. I won't be surprised if their arrogance will cost Europe another 1% in relative annualized GDP growth loss over the next 20 years compared to the US. It's amazing really. Europe had a great setup (low consumer debt, no housing bubbles in France and Germany, relatively healthy banking system in Europe ex-UK) in order to come out of this stronger and quicker than ever. But now its back to the old game plan. Europe is the last on the way into the crisis, will be the last and the weakest on the way out. Just like in 1991/92 and 2002/2003. And once again dumbass European central bankers sacrificed a decent economic setup for the inflation ghost.
Trichet was mentioning what the ECB was considering in other meetings in terms of different cuts. this time he said 'it was a consensus no further comment', its like they cant admit they considered 100bps to save their lifes
Agreed on the fact that Trichet and al. behave quite badly but, to me, it's not stupidity, it's more cowardice. ECB and the Fed are having different official goals : both have to care abbout inflation but only Fed is supposed to help growth and employment. Thing is, if Trichet would have care about growth, noone would dare currently to tell him he shouldn't but he is just one good soldier doing what he's been told to, and nothing else. Quite sad.