The ECB Monetary Policy Mess in One Picture

San Francisco Fed economist Fernanda Nechio shows us in one picture the ECB monetary policy mess:


If there were any doubt that the ECB is in practice narrowly setting monetary policy for the core countries (i.e. Germany and France) this figure should remove it.  The figure should also nix any doubts as to whether what is good for the core is good for the periphery.  ECB monetary policy was too loose in the early-to-mid 2000s and now it is too tight.  If the ECB really wants to preserve the Eurozone in its current form it must confront this reality.  So far it hasn’t and this is why I say the ECB is fiddling while the Eurozone is burning.

This post originally appeared at Macro and Other Market Musings and is reproduced here with permission.