ECB Inflexibly Flexible – A Turning Point for the Euro?

Following the European Central Bank’s (ECB) press conference following its monthly meeting, President Trichet’s main task was to boost credibility. As Trichet makes abundantly clear, the ECB is "inflexibly attached to price stability." To achieve its goal, however, he could have added the ECB needs to be inflexibly flexible. When quizzed on the ECB bond purchase program, a program that may take the ECB down a slippery road of money printing should it not be properly neutralized, Trichet discussed three elements: the purpose, the design and observation of the program.The purpose is to support the markets when the transmission mechanism of monetary policy is not functioning;The design is to buy select government bonds while withdrawing liquidity;The third phase is to observe the effects on the …