Roubini Slams Trichet For Making The Biggest Mistake In ECB History

5/9/2011

Nouriel Roubini tweets: "I was just interviewed on C NBC:The ECB has to reverse this week its biggest mistake ever, the rate hike that sharply worsened the EZ crisis."

What's amazing about the ECB rate hikes earlier this year is that EVERYONE saw the possibility that it was going to turn into a disaster, in part because it so nicely echoed the blunder from 2008, when Jean-Claude Trichet -- looking at surging oil prices and a weakening banking system -- decided to hike rates in order to fight inflation.

Here's a chart we ran earlier this year, showing what the scene looked like in 2008, as Trichet hiked rates right at the top of the oil peak, only to see the whole thing collapse soon thereafter.

What's actually amazing is that the ECB's rate hikes from this year haven't been reduced yet. With all the ECB has had to do to glue the whole thing together (buying Italian, Portuguese, and Greek bonds), the obvious move -- reversing the rate hiks -- still hasn't been done.

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