The following excerpt is bewildering, and I am always amused at how policy-making economists in the EU (to a man, career beurocrats) tangle up their thinking. The article is a warning about lowering interest rates for fear of an "inflationary spiral", yet presents as evidence oil and food.
Oil and food markets are priced in dollars (well, the futures markets in any case), so from the evidence presented it would seem lowering EU interest rates (depreciating the Euro) would be the proper policy measure.
Friday April 4, 9:29 am ET
By Aoife White, AP Business Writer
European Finance Ministers Urge Efforts to Cool Inflation, Warn of Price Spiral
BRDO PRI KRANJU, Slovenia (AP) -- European officials warned Friday that governments must act to curb a possible inflation spiral as record-high price increases risk hurting people on low incomes.
High prices for oil and food pushed inflation to 3.5 percent in March, far above the European Central Bank's guideline of 2 percent.
European Central Bank President Jean-Claude Trichet signaled a determination to keep interest rates on hold, saying "price stability is something which is essential for the poorest and the most vulnerable of our citizens."
"They cannot protect themselves against inflation," he said after he joined euro finance ministers for talks. "It is extremely important that we understand that moderation today is necessary if we want to deliver price stability in the medium term."
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