Jefferies Fixed Income department has our quote of the day:
Is Jean-Claude Trichet really Keyser Söze?
And so, to no one’s surprise, the ECB followed through on June’s “strong vigilance” with a July rate hike. What’s more worrying is that Trichet repeated almost verbatim his opening statement from April (the first time the ECB tightened policy in the cycle). Of course, the ECB “never pre-commits”, but at this point it appears to have set its sights squarely on an October rate hike. That will be Trichet’s last meeting at the helm (with Mario Draghi set to take charge from November onwards) and there may be an argument that Trichet may want to deliver one last rate hike and leave the slate clean for the new ECB president . . .
So what about the ECB and Trichet? In the movie “The Usual Suspects”, at the very end, the main character morphs from a mild mannered victim of mistaken identity to a prolific manipulator and a mastermind of total annihilation of all his enemies. So are we watching life imitate art?
Trichet has repeatedly suggested that EMU in its present form is not fit for purpose. So is he now willing to sacrifice the periphery in order to fully expose the flaws of having a monetary union without much closer fiscal and political integration and possibly a single bond market? And are we witnessing mild mannered Trichet covertly but ruthlessly bring down the euro area economy just so the entire system can be re-build from scratch by his successor Draghi? As we move toward higher and higher ECB rates, one has to wonder . . .”