Trichet Says World Central Bankers United in Inflation Fight
May 09, 2011, 8:37 AM EDTBy Jana Randow and Scott Hamilton
(Updates with Trichet comments from sixth paragraph.)
May 9 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said the world’s central bankers are united in fighting inflation fueled by surging commodity prices and fast- growing emerging economies.
“There is a solid unity of purpose of all central bankers concentrated on solidly anchoring inflation expectations,” Trichet said today in Basel, Switzerland, after chairing the Global Economy Meeting. The global economic recovery has been “confirmed” and there is “potential for real overheating in emerging countries,” Trichet said.
Global rate setters are growing more concerned about inflation as the world economy gathers strength and food and oil prices increase. The ECB raised interest rates last month for the first time in almost three years. Central banks in the Philippines, Malaysia and India also tightened borrowing costs last week.
Oil has gained 10 percent this year after unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt before spreading to Libya, Algeria, Bahrain, Iran, Oman, Syria and Yemen.
“Our colleague from Saudi Arabia mentioned that Saudi Arabia is standing ready to supply appropriately the market,” Trichet said.
‘Great Importance’
The surge in commodity prices is “an issue of great importance” because “it has a direct impact on CPI inflation all over the world,” Trichet said. “It calls for avoiding second-round effects and anchoring inflation expectations.”
The International Monetary Fund on April 11 forecast inflation in advanced economies will average 2.2 percent this year and 1.7 percent next. It predicted inflation in developing and emerging economies will average 6.9 percent this year and 5.3 percent in 2012.
Oil prices posted their biggest weekly decline since 2008 last week on concern the global recovery would be weaker than expected.
“There is at this stage no sentiment that there will be a double-dip” recession, Trichet said. “We also see no reason for being complacent in any respect.”
The Washington-based IMF predicts growth in the world economy will accelerate to 4.5 percent in 2012 from 4.4 percent this year. While advanced economies will expand 2.4 percent this year, developing nations will grow 6.5 percent, driven by strong expansion in China and India, the IMF predicts.
‘Absolute Necessity’
Trichet urged governments in developed countries to reduce budget deficits and return to sustainable fiscal policies.
“It is an absolute necessity of the advanced economies to have wise fiscal policies, which was one of the issues we considered important at a global level,” he said.
Trichet met in Basel with his counterparts from the world’s largest central banks including Federal Reserve Vice Chairman Janet Yellen, Japan’s Masaaki Shirakawa and Germany’s Jens Weidmann. The meeting is held every two months under the auspices of the Bank for International Settlements, which oversees central banks.
--With assistance from Klaus Wille in Basel. Editor: Matthew Brockett, James Hertling
To contact the reporters on this story: Jana Randow in Basel at jrandow@bloomberg.net; Scott Hamilton in Basel at shamilton8@bloomberg.net.
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
