MercoPress. South Atlantic News Agency

Trichet cautiously optimistic on global growth prospects

Jean-Claude Trichet optimistic about prospects for global growth

The chairman of the G10 group of central bankers Jean-Claude Trichet was optimistic on Monday about prospects for global growth even though he conceded that the risks remain listed to the downside.

"We can say that global growth looks like it is going at a pace that remains encouraging", said Trichet in South Africa. However, he qualified the statement by saying that "the risks on overall growth remain to the downside". The president of the European central bank identified sharp rises in the price of oil and food as one key risk to price stability around the world. "We all have to continue to solidly anchor inflation expectations", he added. At the same time, central banks around the world have to manage their economies so that higher oil and food prices do not lead to spiraling wages and incomes, "the dreaded second round inflationary effects". Addressing the thorny subject of currencies, in particular the US dollar's relentless fall and China's tight management of the Yuan, Trichet reiterated that "excess volatility in currency markets is undesirable". Trichet said countries with larger current account surpluses have indeed made some progress in rebalancing their economies -- away from exports to boosting domestic demand -- but insisted that no single country was singled out during his discussions with his peers in the G10. Nevertheless China seems to have been the target. Trichet said the meeting with his counterparts did not discuss the issue of sovereign wealth funds or the possibility that oil producing Gulf states may un-peg their currencies from the dollar.