Nov 11, 2008 |
Disinflation or inflation? SAO PAULO - THE world financial crisis and the multi-billion-dollar responses to it have left both disinflationary and inflationary pressures requiring different approaches, the Bank for International Settlements (BIS) said on Monday.
Mr Jean-Claude Trichet, head of the European Central Bank and chairman of a Global Economy Meeting of the BIS in Sao Paulo, said that there was no one-size-fits-all model for countries grappling with the crisis.
'We are certainly facing global financial turbulences that are intense and that have intensified,' he told reporters after the regular bimonthly meeting by the world's biggest gathering of central bankers.
'We are not in the same situation,' he said.
Some countries 'have a very good handling of inflation expectations (for whom) upside risks to price stability had diminished significantly. Others are still to cope with inflationary pressures that are not negligible.'
Reactions to the continuing crisis therefore 'had to be considered by each country' in relation to their set of circumstances he said.
Mr Trichet refused to speak about any one country in particular, although he did praise China for its decision, announced on Sunday, to implement a US$586 billion (S$877 billion) stimulus package over the next two years to boost consumer spending.
'We considered that what had been decided by the Chinese authorities is certainly going in the right direction. The Chinese current account surplus was signalling room for manoeuvring precisely to foster domestic demand,' he said.
The BIS believed the move went to 'diminishing the risks at the level of the global economy and permitting to go through this period, which is obviously demanding and difficult'.
Those countries with no room for manoeuvre in terms of cutting interest rates or stimulus spending, however, 'should be very cautious for all reasons including because they could destroy confidence if they would be bold in situations where they already have an imbalance,' Mr Trichet said.
That warning appeared to be aimed at some emerging economies that are facing the crisis with high rates of inflation, low foreign currency reserves and limited access to credit to fund stimulus packages. -- AFP
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