Split Among the Three Big Central Banks

http://scotlandonsunday.scotsman.com/business/Divided-they-stand.3715126.jp

Not everyday I post something from Scotland but found this article interesting. Excerpts below point to the very different views between the central banks in looking at rate cuts and inflation. I do not know how Europe's inflation can be that much worse than the United States. It seems that Europe is getting it while the pressures of election year and Bernanke's love for higher stock prices is causing him to all but ignore half his mandate (to control inflation). Today again inflation signs were everywhere. Tyson complained bitterly in their earnings about inflation and said major price increases were coming. Hershey's basic chocolate bar has price increases coming of 13%. My family's company (manufacturing) just found out their will be across the board double digit steal price increases. Recession or not for the most part it is still an U.S. phenomenon and the demand on the margin (i.e. India and China) is going to cause huge problems going forward. I hope Bernanke doesn't bring us back to the 70s.

From the article

A truly dramatic week, with some of the worst falls seen since the 9/11 terror attacks in America, saw the three most powerful banks in the Western hemisphere respond in three starkly opposing ways. The reaction of the US Federal Reserve was swift and dramatic. That of the Bank of England was more cautious and measured. And the European Central Bank responded to pressure to follow the US with a determined 'Non', or, more accurately, 'Nein'.

Can all three be right? And might this evident lack of co-ordination and joined-up thinking cause the markets to be even more worried than they are?

Government officials and policy advisers at the World Economic Forum at Davos have been unnerved by the absence of a co-ordinated response. Calls for a global approach have now started to come thick and fast. Financial market veterans frequently note that one of the catalysts for the 1987 stock market crash was very public disagreements between the United States and Europe over the appropriate monetary and fiscal policy actions needed. And for them the events of the past week will have been especially scary.

and

On many measures, inflation expectations are the highest since BoE (Bank of England) independence.

and

ECB executive board member Jurgen Stark set the uncompromising tone with a statement that the bank was "very worried and alarmed" about inflation.

and

So which response is right – the dramatic slashing of rates by the US Fed, the highly guarded response of the Bank of England governor, or the 'No Surrender' stance of the ECB?

All involve cultural reactions to the crisis at hand, which seems to have acted to bring out fundamental regional differences in philosophy and outlook. US central bank policy, certainly since the mid-1980s under Alan Greenspan, has always seemed especially sensitive to adverse stock market reaction, the memory of 1929-30 being hard-wired into the American financial mind. The UK has always tended to prefer a pragmatic, muddle through approach. And the ECB's reaction reflects the continuing huge influence of Germany's deep-seated fear of hyper-inflation and its many consequences.