A Growth Policy Has The Bundesbank In A Bind

Having established its reputation as an inflation-fighter, the Bundesbank surprised many Europeans by unexpectedly lowering its discount rate by 50 basis points on Feb. 17, to 5.25%. The rate cut was welcome relief for the moribund economies of Germany and its neighbors, which immediately lowered their own rates a notch as well. But coming after nearly four months of inaction in the face of continued economic sluggishness, the timing of the move again raised the question that perplexed Europeans keep asking about the Bundesbank: "What does the Buba want?"

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