5 reasons among many others to say Stop the dogmatism of Jean-Claude Trichet:
- Raising rates by the ECB will not reduce inflation. Indeed, a rise in interest rates will fight against inflation if the latter is due to demand exceeding supply, ie a strong growth. Raising rates reduces demand, then inflation. Today, inflation is mainly due to soaring prices of raw materials, which for two-thirds is due to speculative pressures. Increasing the refi rate will not reduce the latter. Quite the contrary.
- Raising interest rates will aggravate inflation for euro landers. Indeed, if the ECB's refi rate increases, the euro will rise again, the dollar will fall, therefore oil prices will rise. In other words, wanting to fight against inflation by increasing interest rates, the ECB would actually increase the latter.
- Increasing the ECB's refi rate would chip into growth for euro landers which is already very fragile. Should we recall that retail sales (a leading indicator of household consumption) are currently near its lowest historical levels? Should we also recall that the economic sentiment index calculated by the European Commission announced an economic growth within the euro zone of only 1.2% by next fall? In other words by increasing rates, the ECB will aggravate stagflation (economic stagnation and high inflation).
- By acting consistently in a dogmatic stance and not by economic pragmatism, the ECB has become the best ally of Euro sceptics and weighs on the credibility and sustainability of the euro zone.
- With the exception of a few well-righteous and / or supporters of the single thought, all the euro landers are aware of the faults which we have mentioned above. Everyone is complaining, but nobody acts. But it is no longer possible to support a dogmatic ECB, with cynical and contemptuous regard to businesses and citizens within the euro zone.