Trichet Unmoved by Euro-Inflation Surge, Says U.S. Is Different
The latest spike in inflation around Europe has failed to alter Jean-Claude Trichet’s view that the increase presents much less of a danger than rising prices in the U.S.
“There is a big difference,” the former European Central Bank president said in an interview during a visit to Abu Dhabi on Saturday. “In Europe, at the present moment, you could say that the thesis that inflation is transitory can be accepted.” But the claim that it’s the same for the U.S. “calls for some skepticism,” he said.
Trichet cited U.S. core inflation, which is about double the Europe Union’s, and a much larger fiscal-expansion program as reasons to be more wary of American price pressures. The U.S. current-account deficit also suggests that a significantly more accommodating overall policy mix will be used than in the euro-region, which enjoys a current-account surplus.
Euro-area consumer prices rose 3.4% in September, according to figures from Eurostat on Friday. A core-inflation measure stripping out volatile components such as food and energy climbed to 1.9%. Prices paid by consumers in the U.S. rose 5.3% in August, compared with a year earlier, Labor Department data showed Sept. 14. Core inflation was 4%.
Though it’s more likely inflation will prove to be transitory, both the Federal Reserve and ECB policy makers should remain watchful, Trichet said.
“Of course, vigilance remains of the essence because the credibility of all central banks relies upon their capacity to re-anchor and preserve inflation expectations in the medium and long term around 2%,” he said. “Since the great financing crisis, 2% has been the largely shared definition of price stability, particularly in the U.S., euro area, U.K. and Japan.”
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