The European Central Bank needs more timely information about euro-area banks to head off debt crises, said Gilles Moec, co-chief European economist at Deutsche Bank AG.
“There is a huge rationale to get the central bank more ‘au fait’ of what’s happening in the banks,” Moec said today at the Bloomberg European Debt Briefing Conference in New York hosted by Bloomberg Link. The central bank needs “the possibility to address both setting the rate and also take into account the transmission of monetary policy,” he said.
Moec, a former Bank of France economist, said the current crisis in Europe stems from basic differences in the way banks operate in countries as different as Germany and Spain.
European central bankers are debating when and how to raise interest rates even as they grapple with the more immediate challenge of helping the continent through the debt crisis. The ECB kept its benchmark rate at a record low of 1 percent earlier this month, and President Jean-Claude Trichet also toughened his rhetoric on inflation after it rose to 2.2 percent in December.
The bank faces “conflicting pressures” within the euro area as it seeks to maintain price stability, said Joyce C. DeLucca, managing principal at Kingsland Capital Management LLC. She said the central bank may have a tough time addressing inflation without also tackling issues like the region’s slow economic growth and banking woes.
‘Much Tougher Job’
“I frankly think that the ECB has a much tougher job ahead of it because you have a different framework under which a single currency is working or not working, as the case may be,” DeLucca said, comparing the ECB to the Federal Reserve.
European policy makers benefit from a clearer focus on inflation than their U.S. counterparts, said Axel Merk, president and chief investment officer of Merk Investments LLC. He said inflation expectations are now rising in the U.S. because of “easy money” from the Fed.
Merk praised Trichet for emphasizing that the ECB’s emergency measures are temporary and won’t change the bank’s underlying single mandate. He predicted that strategy would continue if Trichet is succeeded by officials such as Germany’s Axel Weber or Italy’s Mario Draghi.
“Central banking is not about being loved by the markets. Central banking is about pursuing price stability,” Merk said.