PARIS: Record prices for oil and other commodities, including food, pose a threat of inflation in a globalized economy, European Central Bank president Jean-Claude Trichet said on Friday.
The current surge in commodity prices, including food more recently, which is resulting in particular from supply being unable to match higher demand from emerging markets, reminds us that globalization can also lead to risks to world inflation, Trichet said.
Trichet, addressing a Bank of France conference on globalization, also said the ECB was closely monitoring losses on financial markets sparked by concerns over the US economic outlook.
We are very closely monitoring the ongoing significant market correction we have experienced since the middle of last year, taking into account all their possible consequences including on inflation, he said.
On Thursday, the ECB left key interest rates on hold at the same time as it cut its 2008 and 2009 growth forecasts but raised its estimates for inflation.
Trichet, resisting pressure for a rate cut to help bolster slowing growth in the fallout from the US housing market collapse, insisted that inflation remained the ECB s central concern.
In February, eurozone inflation stood at 3.2 percent, the highest level since the euro was launched in 1999.
Critics of the ECB calling for interest rate cuts have contrasted its stand with that of the US Federal Reserve which has slashed its rates and promised to do more still in an effort to keep the faltering US economy on track.
Bank of France governor Christian Noyer told the conference that the good times are behind us in terms of economic prosperity.
Globalization no doubt considerably helped central banks over the past decade … Today, this is less clear cut, Noyer said.
He said that for all countries, the risks for growth were on the downside while for inflation they were on the upside. -AFP
