By David Barwick
WASHINGTON (MNI) – “Brutal” movements on foreign exchange markets
must be avoided and all parties are called on to help prevent excessive
volatility, European Central Bank Governing Council member Guy Quaden
told Market News International Saturday.
The head of the Belgian National Bank, speaking on the margins of
the semiannual meetings of the IMF and World Bank, urged more
cooperation in international monetary affairs and warned that there
would be no winners in a currency war.
Inflation in the Eurozone is likely to remain subdued, though
without giving way to deflation, while growth prospects are “not bad”
despite risks, most notably from slowdowns in other parts of the global
economy, he said.
“We have to avoid brutal movements” on forex markets, he said. “And
so I hope … that without delay we will have more cooperation on that
field.”
The position of the Governing Council of the ECB is clear, he said:
“We live in a world of floating currencies, but excessive volatility is
bad and to be avoided by common efforts at the world level.”
As to a so-called currency war some observers already see the world
engulfed in, Quaden said: “I don’t like the word and I don’t like the
idea because a currency war is a war that every country would lose.”
It is hard to imagine that the lessons of the 1930s could be
forgotten, he said. The most recent crisis narrowly skirted becoming a
renewed Great Depression thanks to monetary and fiscal authorities’
“quick and adequate reaction” and the “relatively good level of
international cooperation” compared to the 1930s, he affirmed.
“And it would be very bad if that spirit of cooperation would
vanish,” he said. “We need, on the contrary … more cooperation on the
international monetary field.”
Turning to the Eurozone price front, Quaden said that “if we
decided to maintain our interest rates at a very low level, it is
because we think on the basis of available information that the
inflation will remain within the limits of our definition of price
stability.”
He continued: “At the level of the Eurozone as a whole the domestic
price pressures remain contained and the inflation expectations well
anchored. And on that basis we think that our monetary policy stance,
very accommodative, remains appropriate. And we don’t see any
deflationary risk in the Eurozone.”
The global growth outlook includes a very slow recovery that is
“fragile and uneven and fragile because it’s uneven,” he said.
Although the recovery in the Eurozone is also unevenly distributed,
“if we take the Eurozone as a whole, prospects are not bad,” Quaden
affirmed.
Growth in the second half of this year will remain positive, though
proceed at a slower pace than in the “exceptionally strong” second
quarter, he said.
“The recovery is continuing at a more moderate pace, but
continuing, and mainly soft data — the confidence surveys in particular
in Germany and Belgium — point in that direction,” he said, adding that
this “is also the case of some hard data.”
The forecasts of the ECB for growth next year remain valid, he
said, “but there are risks, and in particular due to the slowing down in
some other parts of the world.
Quaden emphasized that “what was appropriate” at the time of the
ECB’s monthly press conference two days prior “is still appropriate two
days after.”
Notwithstanding the insights from meetings taking place here, “I
have not seen any big change in the last hours,” he said. “So what we
decided two days ago is appropriate, and the comments made by [ECB]
President [Jean-Claude] Trichet during his last press conference with
the prospects also for our monetary policy decisions — not only the
decisions that we took, but also the comments made by Mr. Trichet —
remain appropriate and valid.”
–Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com
** Market News International Washington Bureau: 202-371-2121 **
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