European Central Bank CEO: rising prices for oil, food - risk

Photo: European Central Bank CEO: rising prices for oil, food - risk

Despite the fact that increasing prices for oil, food and other commodities are a risk, the outlook for global economic growth remains encouraging, the European Central Bank’s president said Monday.

"Global growth continues at an encouraging pace even if it is slightly below the 5 percent level," Dow Jones Newswires quoted Jean-Claude Trichet as saying at a news conference on the sidelines of a central bankers meeting in South Africa.

The International Monetary Fund has projected global growth of around 5.2 percent this year and 4.8 percent in 2008.

"The risks overall are on the downside and this of course stems from the risk of further oil and commodity price rises, as well as food price rises," Trichet said.

Trichet said that central banks should prevent high oil and food prices from leading to "increases in a number of other prices, and wages and salaries," that would result in an upward inflation spiral.

Central banks must provide price stability, anchor inflation expectations, and ensure that markets are functioning smoothly, especially in times of market turbulence, he said.

He also noted that emerging economies have been performing well despite recent turbulence on global financial markets.

The emerging economies "appear to be very solid, very resilient, in a period where we have an ongoing market correction in the industrialized world."

That market turbulence, he added, "calls for being alert, for not being complacent."

Trichet said central bankers also discussed turbulence on currency markets, but said no specific currency or country was singled out. In recent months, the dollar has steadily declined against the euro, the yen and most other currencies, as losses in the U.S. mortgage industry have led the Federal Reserve to cut interest rates to protect U.S. economic growth.

Trichet also said no country was singled out in discussions on trade surpluses.