Central bank heads from leading industrialised and developing countries met yesterday to confront potential threats posed by global imbalances and inflationary risks from rising commodity and asset prices.
Central bankers gathered at the Bank for International Settlements (BIS) worry that global imbalances like the US current account deficit and high energy and commodity prices could threaten an otherwise rosy global economic outlook.
"[ Global imbalances] is one of the biggest potential risks in the global economy we are facing, always," said Bank of Japan Governor Toshihiko Fukui, entering the BIS. "We have to continue keeping an eye on oil prices as a substantial risk."
The world economy roared into 2006 after a lacklustre final quarter of last year and looks to be accelerating as a series of leading indicators and official forecasts are all pointing up.
The International Monetary Fund last month raised its 2006 global growth forecast to 4.9 per cent from 4.3 per cent, and the three top central banks worldwide are examining interest rate rises. In the meantime, global imbalances are becoming a rising concern for financial policymakers - an issue they highlighted in their April Group of Seven statement.
Perhaps the most worrisome is a US current account deficit worth more than 6 per cent of national output and countervailing surpluses and reserve stockpiles in Asia and among oil exporters. The concern is foreign players, who finance the gap, might at some stage baulk at accumulating more US assets, triggering a dollar slide.
- (Reuters)
