For the complete report from Forbes.com click on this link
On the day that U.S. investment banking Morgan Stanley announced a larger-than-expected fourth-quarter loss because of subprime write-downs, European Central Bank chief Jean Cleade Trichet gave investors a stomach-turning reminder that he simply wouldn't be able to fight the squeeze on borrowing costs by cutting interest rates in the eurozone. The problem is rising inflation, something which, if not kept under control, could have an even more damaging effect on the European economy than the subprime mortgage crisis."Looking ahead, the inflation rate is expected to remain significantly above 2% in the near future, and it is likely to moderate only gradually in the course of 2008," said Trichet. That means the European Central Bank won't cut interest rates until well into 2008, unlike the U.S. Federal Reserve, or Bank of England, which have both cut rates recently. Unlike the ECB and the Bank of England, the Federal Reserve does not have an inflation target that it uses to for determining monetary policy, though it is currently debating adopting one.
Things are a little easier for the Bank of England, which also has a 2.0% consumer price inflation target, but is currently dealing with a CPI of 2.1%.
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