Almost on cue, the European Central Bank took a page out of U.S. Federal Reserve's playbook Wednesday.In a widely-expected statement, ECB President Jean-Claude Trichet warned that the euro-zone's inflation surge was likely to last longer than expected, Bloomberg News reported Wednesday.
The comments came one day after the ECB made $500 billion in short-term loans available to banks to avert a year-end liquidity crunch. The $500 billion move was part of a coordinated effort among the world's major central banks to increase liquidity in the international finance system to head-off a potential credit crunch stemming from subprime mortgage and related asset defaults. Many economists and analysts expect the major central banks -- the ECB, the Fed, the Bank of England, the Swiss National Bank and the Bank of Canada -- to continue to sequentially add liquidity to the system through at least Q1 2008, and probably longer.
On Wednesday, Trichet said the euro-zone "faces a 'more protracted' period of elevated inflation than previously expected, indicating no imminent plan to reduce interest rates."
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