EUROPEAN CENTRAL BANK RATE HIKES 2011

EUROPEAN CENTRAL BANK RATE HIKES

Let me just present some facts regarding the central bank rate hikes. I understand that the ECB faces more pass-through from higher energy prices to core inflation. It is my belief that euro-zone crisis could still blow up this spring, whether ECB is willing to continue offering a free put on Greek, Irish and Portuguese bonds. In addition, Japan’s catastrophe – the uncertainty surrounding the world’s second largest economy about nuclear contamination is another fact to go slowly. I think radioactivity spread curtail production at least for some time, a major slow down of the Japanese economy would have to be expected, with repercussions also for world growth. April rise now looks like it would be mistake. This is not the time to follow the rigid interest rate rules.

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