By David Barwick

WASHINGTON (MNI) – The slowdown of the United States economy is not
a surprise unless one was overly optimistic or took a short-term view of
things this summer, European Central Bank Executive Board member Lorenzo
Bini Smaghi told Market News International on Sunday.

Speaking on the margins of the Annual Meeting of the IMF and World
Bank, Bini Smaghi called ECB policy “appropriate” — all things
considered — and suggested that despite still great uncertainty, the
outlook at the moment is perhaps less uncertain than in the midst of the
sovereign debt crisis this spring.

“The slowdown in the United States was projected six months ago,”
he said. “The forecasts today are very similar to those at the beginning
of the year, if you look at the IMF forecasts. So there is nothing
surprising.”

If concerns over U.S. prospects have generally increased in recent
weeks, it is “because they were maybe over-optimistic in the course of
June,” when there was an upward revision, he said.

“But if you compare to the forecasts at the beginning of the year,
it’s more or less in line,” he said. “So the recovery is in line with
what was projected.”

The deterioration “didn’t surprise us,” Bini Smaghi emphasized. “It
didn’t surprise the IMF, it did not surprise the professional
forecasters. Maybe it surprised those who … follow the situation in a
very short-term way and adjust the forecast excessively based on the
last number. And the beginning of the year was very good, with good
numbers, and people got over-excited and revised the forecast up instead
of looking through the recovery.”

Although “there is great uncertainty,” he said, “the central
scenarios of all forecasts are not that different from what they were
one year ago.”

Asked if one could at least say that uncertainty for Europe had
increased as a result of the U.S. situation, he replied: “We always said
that this recovery would be at a slow pace with a lot of uncertainty
surrounding it.”

“We are going through a very uncertain world and for Europe
compared to May and June maybe we have less uncertainty,” he added. “It
was much more turbulent in May and June when we had the sovereign risk.”

As to whether economic lethargy had a positive aspect in the sense
of dampened inflationary pressures, Bini Smaghi noted that “there are
many factors which can operate in both ways.”

“We said that there are no inflationary pressures now, but there
are no deflationary pressures in the euro area,” he said. But we don’t
see them globally, either.”

“Actually, we see some inflationary pressures in commodity markets
and other areas, and there is abundant liquidity throughout the world,
he noted. “So we have to look at all of this. But taking all this into
account, we consider policy to be appropriate.”

Emerging economies “are proving to be much more resilient than we
thought,” Bini Smaghi said.

It remains to be seen whether emerging markets can offset U.S.
weakness, he said. “But again, if you look at the economic recovery
through the cycle, taking all into account, there is nothing surprising
in what we are observing today.”

–Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com

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