Group of 10 central bankers’ chairman says the global economy is growing strongly and there is no room for complacency on inflation pressures.
BASEL/SWITZERLAND: The global economy is growing strongly and there is no room for complacency on inflation pressures, Group of 10 central bankers’ chairman Jean-Claude Trichet said on Monday. Trichet, who is also president of the European Central Bank, said uncertainties were mounting around the outlook for growth, which could moderate slightly in 2007, but overall the economy had proved its resilience by weathering high oil prices and turbulence on financial markets earlier in the year.
“If I had to sum up the main sentiment I would say: robust growth in a universe of uncertainties that are augmenting,” he said after meetings at the Bank for International Settlements. While inflation expectations were generally stable, central banks could not afford to let down their guard. “All central banks that were around the table have a mandate to deliver price stability,” Trichet said.
“Our overall judgment on a global level was that, thanks to the measures that had been taken in various parts of the world, the preservation of this anchoring of inflationary expectations had been maintained, but there was absolutely no room for complacency,” Trichet said.
Central banks around the world have been gradually withdrawing liquidity pumped into the economy after the 2001 stockmarket crash and the terrorist attacks in New York, which occurred five years ago on Monday.
The US Federal Reserve held credit costs steady in August, breaking a string of 17 consecutive increases, but the Bank of Japan raised rates in July for the first time in six years and ECB rates are still rising amid stubbornly high inflation and the best growth performance in six years. But many economists think euro zone growth has peaked and point to economic headwinds at a global level next year as the US housing market cools and oil prices remain high.
The global economy is expected to grow about 5% this year before easing back a notch in 2007. Trichet dismissed the prospect of a sharper slowing. “The sentiment of growth is likely to be quite robust, perhaps a little bit lower,” he said.
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