Tue, 08 Mar 2005

From: AFP

Global growth to stay modest

Top central bankers said on Monday their forecast for modest growth in the world economy was unchanged, but urged greater transparency from oil markets despite expectations of a fall in prices.

Jean-Claude Trichet, who chairs the G10 group of central bankers, said after they met in the Swiss city of Basel that there was a "broadly unchanged sentiment that we have modest growth this year".

Trichet added that "I do not exclude that the price of oil could diminish", but reiterated a call for continued vigilance.

"We would certainly call for an improvement in transparency," the European Central Bank chief told journalists, adding that the statement directed towards oil markets was "the main message" of the meeting with his counterparts.

At their last meeting in January, the G10 central bankers had predicted "substantial" economic growth of about four percent as the growth in oil prices subsided. Trichet emphasized on Monday that the bankers' outlook was unchanged without citing a specific growth figure.

That prediction was largely based on expectations of decline in oil prices following record highs reached in recent months.

Central bankers also examined low inflationary expectations or pressure on the world economy, concluding that it was partly down to greater credibility of central banks -- including in the euro zone.

"We had the feeling that the credibility of central banks in delivering price stability over time had augmented," Trichet said.

"It is true in the euro area that we are impressed that the anchoring of inflationary expectations are quite good," he added.

But bankers were puzzled by the current behavior of the international financial system, citing the combination of low levels of real interest rates on a global basis, low volatility on financial markets and low yields.

"The real interest rates that are quite low are quite a puzzle," Trichet remarked.

The G10 groups 11 central banks from Britain, Canada, France, Germany, Italy, Japan, the United States, as well as Belgium, the Netherlands, Sweden and Switzerland. -- AFP