Federal Reserve Chairman Ben Bernanke has allowed global stock markets to railroad him into a whopping 75-basis-point cut in interest rates just one week before the regularly scheduled meeting of the Fed’s decision-making Open Market Committee. European Central Bank President Jean-Claude Trichet would never allow this to happen to the ECB – he manipulates markets; markets don’t manipulate him.
Indeed, with America’s economy in apparent freefall, Trichet is threatening euro-zone trade unions with pre-emptive interest-rate hikes unless they behave as he sees fit.
These threats may be proving counter-productive to the achievement of price stability in the euro-zone economy, the central bank’s primary objective.
For example, to make his threats of an interest-rate hike in the midst of a global slowdown credible, the ECB president is using his press conferences to tell the world how strong European growth is.