The news today that despite a clearly weakening outlook for real growth the European Central Bank will hold interest rates steady really makes you wonder what they're thinking in Frankfurt.
Central bankers would like you to believe that their job is really complicated and difficult, but done properly it's very simple. If the outlook for growth is worsening and global commodity prices are tumbling, you need easier money. If there's no economic slack and additional demand is just turning into a higher price level, you need tighter money. It's quite clear which situation Europe is in, so the job is to ease monetary conditions.
Instead the ECB seems to have decided that its job is to play nanny to a few dozen querrelsome electoral democracies and dole out appropriate monetary conditions as a kind of reward for good behavior: "Implement the labor market and budget reforms we favor and we'll give you a happy meal."