FINANZE - NEWS NEWS it FINANZE RSS Feed Generator Why ECB should lower interest rates Attending a meeting of Christian Union Democratic Party in Germay on Saturday , ECB president has once again pointed at his traditional obsession, inflation fighting. Inflation these days is in our opinion primary driven by factors that not only fall outside central banks control, but are also aggravated by lack of coordination in interest rates setting policies. Markets are in fact focusing on interest rates differentials to push relative exchange rates. ECB is moving in isolation; as a consequence Euro is bearing the burden of dollar depreciation almost by itself. Dollar depreciation translates in more than proportional increases in raw materials, the true cause of inflation. The price of oil, for instance is not driven by supply/demand factors: total value of daily oil contracts roughly equals one year world consumption. Speculation on currencies and not demand therefore drives the price of oil. Only if dollar starts appreciating, or at least stops depreciating, will raw materials driven inflation stop accelerating. By not lowering interest rates, Mr Trichet is pushing European economy into stagflation. Sun, 6 Jan 2008 00:00:00 GMT