THE EUROPEAN Central Bank must be pretty confident it made the right call by leaving interest rates unchanged yesterday. In doing so, it shrugged off the advice of the International Monetary Fund, Germany's leading economic institutes, the Organisation for Economic Co-operation and Development, Uncle Tom Cobbleigh and all.
Does Wim Duisenberg, the ECB president, know something the rest of us don't? The markets took one look at his announcement yesterday and decided he did not, sending the euro even lower because of disappointment that the ECB had not seen any need to do its bit to boost European growth prospects.
Mr Duisenberg's rationale for the inaction hinged on the argument that even after recent downward revisions, European growth was likely to be above its long-term potential. "You can keep on waiting and seeing," he explained in his usual sanguine way. Not according to the US Federal Reserve and the Bank of England, both of which have now cut rates pre- emptively. One possible explanation for the ECB's inaction is that any decision requires a consensus to be reached on the Council.
The word possible is used advisedly, for there is no way of knowing since minutes of the Council's meetings are not made public. …