ECB takes the lead, for now

Last week’s decision by the ECB to raise interest rates before other major central banks mainly reflected its different attitude and approach to inflation-targeting. But we suspect that there were presentations aspects to the move too. At least one more hike looks likely. But if, as we expect, the economic recovery in the region starts to lose steam in the second half of the year and the fiscal crisis continues to escalate – perhaps as the markets’ attention moves on from Portugal to Spain – then the ECB’s latest attempt to play policy-leader may not last much longer than the last one in 2008.