THE BEHAVIOUR of the European Central Bank (ECB) since the global financial crisis began last August has been remarkable. The US Fed has reduced interest rates repeatedly and by a cumulative 3.25 percentage points while the Bank of England has cut base rates by 0.75 of a point. The ECB, by contrast, has not only refused to reduce its interest rates, but amazed observers by hiking them by a quarter-point at its meeting of July 9th.
It's not that the ECB has stood aloof from the turmoil on international money markets. It hasn't. It has pumped record quantities of liquidity into the system, and created innovative ways of doing so, in an effort to keep banks supplied with the cash they need to stay in business.
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