Rebound near, European banker says

May 11, 2009

11 May 2009

Rebound near, European banker says

The following is extracted from today's edition of “”.

The global economy is about to turn the corner as growth has already picked up in some countries, and central banks should have exit strategies to avoid inflation risks, leading central bankers said on Monday.

After chairing regular talks on the global economy, Jean-Claude Trichet also warned that central banks must remain alert as the correction of global imbalances is still continuing….

The world's major central banks have slashed interest rates to record lows and embarked on unconventional easing measures, while governments have introduced a range of fiscal stimulus to battle the downturn.

Mr. Trichet said central banks should keep extraordinary easing measures in place as long as necessary while at the same time preventing inflationary risks from materializing in the medium term.

“They should do both. Central banks should do what is appropriate, taking into account the circumstances and not hampering in any respect the medium to long-term obligation of remaining a solid anchor of price stability,” he said.

In recent sessions, world stocks, measured by MSCI, have hit a 2009 high while credit and money markets have improved thanks to positive economic data and encouraging first-quarter earnings from banks and corporates.

For example, the Volatility Index – Wall Street's fear gauge – has hit its lowest level since September, just after the collapse of Lehman Brothers investment bank. Interbank rates for three-month dollars have fallen below 1 per cent for the first time.

While acknowledging the improvement in risk sentiment, Mr. Trichet urged central bankers to remain alert….

Other central bank governors also echoed Mr. Trichet in saying the worst may be over for the world economy….

World Economy & Politics
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Canadian News Channel / International News Channel
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