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European Central Bank Governing Council member Christian Noyer said on Saturday dollar pegs in some emerging countries were helping to generate global inflation pressures. "One of the factors of inflation in the world today is linked to the fact that a certain number of emerging countries ... have linked their currency to the U.S. dollar and therefore follow a monetary policy very close to that of the (US Federal Reserve) even though they don't have the same economic developments at all," he told reporters. Noyer, the governor of the Bank of France, said many of these countries had economies that were growing rapidly but were nevertheless tracking US rate cuts designed to counteract a sharp slowdown in the US economy. "They therefore have a monetary policy which is not adapted to their situation" and are facing difficulties in controlling their inflation, he said. This could create social as well as economic difficulties in these countries, Noyer said. "It seems to me ... this completely confirms the G7 message, which in a general way calls for greater flexibility of the exchange rates of countries when they acquire a significant economic weight and which have surpluses," he said. While Noyer did not cite any country by name, the statement issued by finance officials from the Group of Seven industrial nations on Friday did pinpoint China in this respect. "We welcome China's decision to increase the flexibility of its currency but in view of its rising current account surplus and domestic inflation, we encourage accelerated appreciation of its effective exchange rate," the G7 statement said. Some other Asian economies and Gulf states also have dollar pegs. Turning to the euro-zone economy, Noyer said the International Monetary Fund's growth forecasts for the region were overly pessimistic. He highlighted differences between the US and the euro-zone job markets, levels of household indebtedness, and housing markets and said there was no reason to expect the euro zone to succumb to the sharp slowdown in the United States. "In the euro zone we don't see the least sign of a credit crunch," he continued, adding that a tightening of credit conditions seen for some operations, such as leveraged buyouts, was a welcome improvement. (Reuters) |
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