Sunday May 6, 2007 - 18:50:46 GMT
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FOREX NEWS - Europe, Asia balancing US econ slowdown-c. bankers
Europe, Asia balancing US econ slowdown-c. bankers
Sun May 6, 2007 2:32 PM ET
By Sven Egenter and Natsuko Waki
BASEL, Switzerland, May 6 (Reuters) - Central bankers from key emerging economies said on Sunday robust growth in Europe and Asia is compensating a slowdown in the U.S. economy but raising inflationary risks.
Global economic growth is at its strongest in three decades and risk-hungry investors have pushed up world stocks to record highs over the past week.
However, the world's biggest economy lost momentum with its growth hitting its weakest rate in four years in the first three months of this year. Euro zone growth is at its best since 2000 and China's economy is expanding at a blistering pace.
"The U.S. economy might be slowing down a bit, but it's still doing very well and fundamentals remain good... We are not talking about recession or significant slowdown," Muhammad Al-Jasser, vice governor of the Saudi Arabian Monetary Agency, told Reuters.
"Whatever slowdown that may be happening in the U.S. is being compensated for by more robust growth in Europe and Asia and the rest of the emerging markets, which are collectively doing very well," he said on the sidelines of a two-day meeting of top central bankers at the Bank for International Settlements.
When asked if he expected a recession, he said: "No, I do not expect a recession, at least from what we know at this point."
Chilean central bank governor Vittorio Corbo told reporters: "We are seeing that the slowdown in the U.S. economy is well balanced, with substantial dynamism away from the U.S., especially in emerging Asia but also in Europe."
The flip side of strong growth is upward pressure on prices, Corbo said.
"There is a major inflation concern in Europe but also in emerging Asia, because the economy is overheating."
In Europe, "their economy is growing at a speed that is putting pressure on existing capacities," he said.
Martin Redrado, Argentina's central bank governor, said higher prices for commodities could lead to second-round effects such as strong wage rises, pushing up inflation, especially in Latin America.
"One of the themes we are discussing is the impact that food prices and energy are having on headline inflation," he said.
"Clearly what we have to be very strongly aware of is second-round effects."
The meeting is chaired by European Central Bank President Jean-Claude Trichet. Bank of Japan governor Toshihiko Fukui also attends the meeting but declined to comment on Sunday.
Investors will scrutinise any comments from Trichet on the euro, which hit a record high against the dollar last month, as well as general dollar weakness.
Saudi Arabia's Al-Jasser said the world can cope with a weaker dollar better now than in the past.
"Not only Saudi Arabia, but the rest of the global economy can withstand more than it could in the past the decline in the value of the dollar," he said.
In China, People's Bank of China governor Zhou Xiaochuan said inflation this year could be higher than 2006.
He added: "There is no evidence to say inflation is out of control... We are very closely watching annual inflation rates."
Chinese inflation is expected to rise by an annual 2.8 percent this year from 1.5 percent in 2006. Annual consumer price inflation hit 3.3 percent in March, the first time it climbed above 3 percent in more than two years.
Zhou also said a bubble in the country's stock market was a concern.
China's main stock index, the Shanghai Composite Index <.SSEC>, has surged about 235 percent since the start of 2006 and more then 40 percent so far this year.
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