The contrasting ways Mr. Bernanke and Mr. Trichet responded to the crisis in the markets reflect something more than the differing economic and financial conditions in the United States and Europe.
At a more fundamental level, they reflect surprisingly different views of how each economy responds to the underlying forces affecting growth and inflation.
The Fed’s mandate, balanced between fighting inflation and encouraging full employment, leads to a simple investor calculus: if growth sags, the Fed is virtually certain to cut interest rates...
The European bank, by contrast, is skeptical of the notion that inflation automatically falls when growth cools, and it has a mandate, inherited from the German central bank, to keep prices stable above all else. So the view from the European bank’s sleek silvery headquarters here is very different from the Fed’s perspective in Washington, whatever market participants may think about the inevitability of lower European interest rates.
great chart from the WSJ
