The former president of the ECB: “Cut rates before the Fed”
“The markets are probably not wrong in predicting that the ECB will lower rates in June, before the Fed: month after month the gap between American and European inflation is widening. But everything remains possible in a phase of strong global tensions, so the central bank is right not to discourage the market from expecting a downturn but without committing itself in any way.” So Jean-Claude Trichetformer president of the ECB from 2004 to 2011, when he handed over to Mario Draghi, and before then the Banque de France for ten years.
In an interview with Repubblica he explains that not “it is appropriate to talk about decoupling, i.e. divergence”, between Europe and the USA “because the objective remains the same, 2%. Indeed, allow me to take this opportunity to recall that the convergence of all the main central banks on the same definition of price stability, namely 2% in the medium term, constitutes the most important de facto reform of the international monetary system after the dismantling of the Bretton Woods agreements”.
Trichet then adds to Repubblica: “We need to push for growth, it’s clear, however as far as inflation is concerned I would like to underline that the ECB has done an excellent job in bringing it back under control. Of course, no victory is ever definitive. We live in a world full of challenges and unknowns, so complacency is not allowed. The Ukrainian crisis, for example, suddenly amplified inflationary pressures in Europe, due to the surges in energy and cereal prices. The high level of alert and vigilance must be the permanent attitude of central banks.”