FRANKFURT, July 20, 2008 (AFP) – The European Central Bank is trying to convince people in the eurozone that taking a tough stand on inflation will get them through lean economic times, arguing that long-term gains warrant short-term pain. “There is a particular need to speak to citizens on inflation and monetary policy right now,” Natixis economist Sylvain Broyer said after ECB president Jean-Claude Trichet laid out the bank’s stance in an interview with four major eurozone newspapers.
Public opinion is emerging as key ground to be won since the bank raised its main lending rate despite signs that economic activity was slowing sharply in the 15-nation eurozone.
Politicians have urged the ECB to ease policies that determine credit conditions for around 320 million people, though they know its main goal is to keep inflation, which hit a record 4.0 percent last month, in check.
The ECB argues that sustainable growth is best served by making sure people know the bank will target inflation of just below 2.0 percent, even if that means letting the economy contract for some months.
“So far it’s been easy,” commented Bank of America economist Gilles Moec, pointing to low interest rates a few years ago when many questioned wheth