ECB chief economist Stark says the current financial crisis is now wreaking havoc. It is a good bet that the financial services sector will shrink significantly, he says. He appeals for patience, saying the impact of central bank measures will take time to materialize. We must guard against creating “the next excess” when we react to the present crisis, he concluded. This an acknowledgment of the notion that Greenspan kept rates too low for too long in the early part of this century which helped create the credit bubble.
Nothing earth shattering here, but the comments are a sharp departure from the happy-talk we heard from the ECB just a few months ago when they felt immune from the chaos that has since spread around the globe.
EUR/USD is consolidating at 1.2530, up from spike lows to 1.2470 late in Europe.