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Diverging inflation trends mean the European Central Bank isn't in the same position as its U.S. counterpart when it comes to unwinding monetary support, according to former President Jean-Claude Trichet.
The Frenchman, who led the ECB from 2003 to 2011, sees a chance that the Governing Council might slow down emergency bond-buying to levels seen earlier in the crisis when it meets on Thursday. But he doesn't foresee officials following the path of the Federal Reserve, which is looking to start phasing out stimulus this year.
“We are in a different universe, it seems to me, in the U.S. and in Europe,” Trichet said in a Bloomberg Television interview. “In the U.S. you had a commitment to purchase exactly the same amount every month, and this is a clear-cut commitment. Tapering means something. In Europe there is flexibility.”
Trichet warned that inflation pressures across the two regions can't be compared, in particular when looking at indicators that strip out the effect of volatile energy and food prices. Yet ECB policy makers have been publicly debating whether the improving outlook warrants a discussion on when to end their extraordinary crisis support.
“In Europe, we are not yet in terms of core inflation at a level which would be alarming in my own reading,” Trichet said. “Whatever decision they take, what is rejoicing to see is that the European economy is growing faster than was anticipated.”
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