The NYT told readers today that the European Central Bank (ECB) might raise interest rates because it is concerned about a strong dollar. It also told readers that "European leaders are increasingly impatient about the weak dollar, which is hurting their economies because Europe depends more on exports than does the United States." Not to be nitpicky, but these are contradictory arguments. If the ECB is worried about inflation, then it should be delighted about the fall in the dollar. This not only reduces the price of imports from the United States, but also the price of imports of goods from China and all the other countries that link their currency to the dollar. This does slow European economies, but presumably that is what the ECB wants, if it is concerned about inflation. In short, the article is claiming that Europeans both want more growth and a higher dollar, which would imply more inflationary pressures, and also lower growth. Clearly different actors may hold different views, but the article should have made this point clearly.
--Dean Baker
