The aforementioned would seem to be enough to justify a monetary tightening, but don't tell that to economist Mark Chandler, who argues an evaluation of just the top-line euro zone price data constitutes a superficial analysis.

Price increases in the euro zone's border or outer nations are less than that, he said. Similarly, the euro zone's GDP growth rate is most likely slowing from the 2.2% Q1 2007-Q1 2008 annualized GDP growth rate reported a month ago. "Taken together they suggest the bias should be to protect against an economic stall, not against prices running out of control," Chandler said. "Inflation is up, but it's not out of control."

Trichet: unbowed and uncompromising

And yet, ECB President Jean-Claude Trichet plowed ahead with the rate increase. Despite a large body of economists who said it was premature. Despite France President Nicholas Sarkosy's criticism of a rate hike prior to last Thursday's meeting. Despite concern that it would further weaken the already-weak dollar (if the U.S. Federal Reserve does not subsequently increase rates later in 2008), thus increasing commodity price inflation, the very economic problem the ECB is trying to quell, not magnify.

Economist David H. Wang said the key to Trichet's decision may be found not so much in the minutiae of price conditions across the 15-nation euro zone, but in the balance of power in the euro zone itself. "In theory, all euro zone states are created equal," Wang said. "But in practice, to borrow from George Orwell, we know that some euro zone states may be more-equal than others." Germany, in Wang's interpretation, "wields disproportionate influence in the euro zone and the ECB." Further, Germany's ECB representatives have been more sensitive to signs of rising inflation, so this "anti-inflation mind set, combined with Trichet's legendary hawkish," helped produce the coalition wanted the interest rate hike, Wang argued. Further, Wang, like Chandler, believes the rate hike was the wrong move at this time.

Monetary Policy Analysis: Wang's ECB analysis provides food for thought and further study. In the final analysis, Trichet will look prescient if inflation pressures continue to build. Conversely, Sarkosy may end up being the leader of a movement -- an ECB reform movement -- if the ECB's rate increase pushes Europe into a recession, with little reduction in inflation. The view from here is that the rate increase was premature.