Today’s ECB President Jean-Claude Trichet’s final rate decision announcement. Deutsche Bank’s Jim Reid offers some parting words:
It’s the end of an era. Life won’t be the same again without our usually entertaining monthly audience with Jean-Claude Trichet – on which the curtain comes down for the final time today. So how will he be remembered once he steps down in the next few weeks? Well it’s fair to say that to some, Mr Greenspan’s legacy has been tarnished by events that occurred after his tenure ended in 2007. Will Mr Trichet’s reputation be defined by the ongoing Sovereign crisis? Well, one can argue that raising rates twice this year was a significant mistake as were the rate rises leading up to the crisis in 2008 (ECB raised rates in July 2008 and June 2007), but the truth is that overall the ECB has a price stability mandate and inflation has pretty much averaged 2% in Europe since he started his term in November 2003. Surely markets couldn’t have asked for much more and shouldn’t really criticise the lack of decisive action at various junctures in this credit/Sovereign crisis? The reality is that given the ECB’s mandate it’s not really Trichet’s fault that Governments and the Financial sector have far too much debt. It’s also not his responsibility to bail them out. So although the ECB has often appeared very slow to respond in this crisis, they have provided liquidity/bought bonds when really needed at the 11th hour. Perhaps they have acted as the classic lender of the last resort, whereas the Fed for example might have been more responsible for helping to ‘stoke the fire’ by being more proactive in recent years and indeed decades and in the process creating too much moral hazard. So goodbye Jean-Claude and although you won’t read this we’d like you to know that we don’t think you could have done too much more given the circumstances and your mandate.