The U.S, Federal Reserve and the European Central Bank are pursuing increasingly divergent economic policies.

The policies are so divergent that it’s almost guaranteed that one or the other of these central banks is wrong.

But the biggest worry is that the interaction between the two policy tracks could result in a combination of slower global economic growth and higher inflation than either policy alone would deliver.

The two divergent policies are rooted in the radically different characters of the two banks.

The European Central Bank sees fighting inflation as job #1. If that means lower growth for the European Union, so be it. The bank operates constantly looking over its shoulder to see if critics and politicians, especially in Germany, think it’s softer on inflation than the Bundesbank, the German central bank that it replaced when the European Union moved to a single currency. No other industrialized nation has Germany’s experience of the chaos of hyperinflation during the Weimar years and the horror of the Nazi regime that took advantage of that chaos. With that history never far from its mind, the Bundesbank built a deserved reputation as the world’s toughest central bank on inflation.

The U.S. Federal Reserve is a house divided in comparison. Congress has told the U.S. central bank to watch both inflation and economic growth. In its semi-annual Humphrey-Hawkins testimony to Congress the Federal Reserve is supposed to explain how its policies are working to ensure stable prices and full employment. The goals may be contradictory but the exercise keeps the Federal Reserve, at least rhetorically, in a balancing act alien to the traditions of the Bundesbank.

You can see the differing characters of the two central banks in the degree to which each leveraged its balance sheets in the emergency. The balance sheet of Federal Reserve more than doubled from the beginning of the crisis through the summer of 2009 as it bought troubled assets from banks, mortgage-backed securities, and Treasuries. The European Central Bank responded in a big way too—at least for that bank–but its balance sheet grew by just 50%.

And you can see the different character of the two banks in their recent program for ending the emergency measures put in place to end the global financial crisis.

The European Central Bank is in a hurry to reverse the steps it took during the financial emergency. On Friday, November 20, the bank surprised European banks by saying it would no longer accept asset-backed securities as collateral for loans unless they had AAA/Aaa ratings from two ratings agencies. (That is securities backed by assets such as mortgages or credit card loans.)

In the aftermath of the collapse of Lehman Brothers in the fall of 2008, the bank began to allow banks to borrow using lower-rated, less liquid securities. Since these were often securities that the banks could not sell, because market for them had collapsed, the central bank’s loans were the only way that hard-pressed banks could convert these securities into cash. In 2008 asset-backed securities accounted for 28% of all collateral put up by banks. That was up from 16% in 2007.

 This follows an announcement in September that the bank would no longer provide three month loans to banks. The bank is expected to announce that its December offer of one-year liquidity will be its last.

All this has the effect of forcing banks to raise capital on the public markets or reduce lending to shrink their balance sheets or to sell off assets if they can. That, in turn, will start to shrink the money the money supply. Which should reduce the chance that inflation moves upward from current low rates. And slow growth in the euro zone economies.

In comparison the U.S. Federal Reserve has lagged in taking these steps. For example, the Fed didn’t announce that it would end its own 90-day loan facility until November 17 and even then it said that it would reduce its 90-day loan term for banks to 28- days effective January 14, 2010.

Rather than warning as European Central Bank president Jean-Claude Trichet did on November 20 that banks should be prepared for the end of central bank support, the Federal Reserve has stressed over and over again that current low interest rates would continue for the indefinite future.

Rather than signaling its concern with some future revival of inflation, the U.S. Federal Reserve has repeatedly expressed its concern that the recovery may be anemic and that it is still not certain that the recovery is self-sustaining and that any withdrawal of central bank support would be premature.

By all projections growth in European economies will be slower than in the U.S. anyway in 2010 and the difference in central bank policies could just increase the difference. The Organization for Economic Cooperation and Development (OECD) November 21009 projections put U.S. economic growth at 2.5% in 2010 and 2.8% in 2011. Economic growth in the European Union was projected at 0.9% in 2010 and 1.7% in 2011.

If the European Central Bank gets it wrong, it could choke off even that limited growth. That would have the effect of slowing the rate of imports by a region that is a top market for both the United States and China. That would lower overall global growth and put more pressure on China to increase exports to the United States at a time when U.S. consumers are still cutting back.

If the U.S. Federal Reserve gets it wrong, it could lead to a faster rebound in inflation than anyone now expects. Any numbers that even smell of inflation to already nervous central banks in Europe and Asia could lead to efforts to slow growth and/or to shrink the money supply.

If you’re worried that to get out of this mess, the U.S. Federal Reserve has to be just about perfect in the manner and timing with which it unwinds the measures in put in place during the crisis, maybe you’re being just a bit optimistic.

It looks like we need two central banks to be just about perfect and yet the two banks don’t agree on what perfect should be.