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ECB Claim The Credit Crunch Is Far From Over

In line with the governor of the Bank of England, Jean-Claude Trichet, the president of the European Central Bank, has gone on record with his view that the credit crunch is far from over and European Central Banks still need to be wary of the risks to long term economic growth.

Trichet believes that too many of his European counterparts are obsessed with reducing interest rates to refloat their economies when they should be keeping a close eye on the growing threat of inflation. This is exactly the same policy which Mervyn King has been promoting in the UK, much to the annoyance of many MPs who are adamant that further interest rate reductions are need as soon as possible to help the economy.

However, there is a risk that all of the good work which the Central Banks have been involved with over the last few months could be undone if inflation is allowed to run riot. A high inflation rate will not only eat into spending power but it will also store up further problems for the future. Economies at the moment do not require a short term fix, they require careful planning for both the short, medium and longer term.

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