ECB President Trichet: High Oil Prices will Trigger an Inflation Crisis

The G10 (Group of 10) central bank presidents' meeting organized by the Bank for International Settlements (BIS) was held in Sydney, Australia on the 20th. European Central Bank President Jean-Claude Trichet and other central bank presidents expressed optimism about the global economic prospects. Trichet, President of the European Central Bank, said: "The global economic outlook remains positive, and the global economy is expected to continue to grow strongly in 2007. However, years of above-average economic growth have resulted in insufficient production capacity, coupled with energy and raw materials High prices, especially rising oil prices, may increase the risk of inflation, and central bank policymakers must remain vigilant about this."

In this regard, Zuo Xiaolei, chief economist of Galaxy Securities, believes that oil prices have become a very important data in the current inflation indicators. Although oil prices have fallen currently, the overall trend of oil prices in the future is to rise, so it is very natural for inflation to rise. "The risk of high oil prices has always been the main risk for inflation in the United States and Europe, and it has also made energy major countries such as the United States and Europe very vigilant."

Zuo Xiaolei’s argument was exactly the same as Trichet’s. Trichet also pointed out that oil prices may rise again in the future. There are signs that the effects of rising oil and commodity prices in the past period are still being fermented and have not been fully reflected in the on consumer prices. It is expected that due to inflation problems, Trichet will continue to release the message that Europe must further raise interest rates. Trichet pointed out that since the beginning of this year, central banks in various countries have raised interest rates one after another. Although oil prices have fallen as expected by experts recently, there are still many risks in the future trend of oil prices. Oil prices will still be a hidden worry in the future. In order to prevent the inflation crisis caused by rising oil prices, Central banks must not take it lightly.

When Trichet attended the previous G20 Finance Ministers' meeting, he also said that to ensure continued strong growth of the global economy, some risk factors must be guarded against, and the normalization of monetary policies in many G20 member states must be maintained. In order to combat inflation, Central banks of various countries also need to continue to raise interest rates.

Zuo Xiaolei also believes that controlling inflation is the monetary policy goal of all central banks around the world. Therefore, as a person in charge of Trichet, it is very reasonable to raise the rhetoric of being wary of inflation. It does not mean that the current inflation in Europe and even the world is really that bad. It's unsettling.

According to reports, Zhou Xiaochuan, governor of the People's Bank of China, said after the meeting on Monday that macroeconomic control measures have begun to have an effect on China's economy, which is growing too fast. Zhou Xiaochuan said that since the second quarter, China's economic growth has shown signs of slowing down. He believes that China's economic growth has slowed down to a very reasonable range. But Zhou Xiaochuan added that it is not yet certain whether this is a specific result, so it will still pay attention to the statistics in the next few months.

Zuo Xiaolei believes: "There is an essential difference between slowdown and sharp decline. 'Slowdown' is the goal of our regulation. Don't exaggerate to understand the word slowdown. But in the end, whether the economy really slows down or whether there is regulation It remains to be seen if excess occurs.”

Federal Reserve Chairman Bernanke, European Central Bank President Trichet, Bank of Japan Governor Toshihiko Fukui and People's Bank of China Governor Zhou Xiaochuan all attended the G10 meeting. This was the first time that the G10 was held outside Switzerland since November 2003.