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London: The world's key central bankers, facing slower growth and rising inflation, will discuss ways to mitigate the impact of the credit turmoil and a tumbling dollar on the real economy at their bi-monthly meeting beginning on Saturday.
G10 central bankers from developed and emerging market economies meeting in the Swiss city of Basel have no shortage of grim news as fresh fears about the credit market and the US economy sent world stocks to three-and-a-half week lows yesterday.
The MSCI main world equity index has halved gains made after the Federal Reserve cut interest rates in January.
The dollar is falling to record lows almost on a daily basis, while the cost of corporate bond insurance hit record highs and the money market is beginning to get stressed again.
Borrowing costs
Central bankers might want to spur the ailing economy by easing the cost of borrowing, but soaring inflation from roaring oil, food and other commodity prices is tying their hands.
The inflation scare was so great in Australia, Sweden and Norway that they raised interest rates over the past few months.
In the words of European Central Bank President Jean-Claude Trichet - who chairs the two-day G10 meeting - this reflects that various central banks might be moving in different directions but they stick to only one objective.
"You have central banks that are moving, others are not, some that are moving down, others moving up. In a way we are all in close coordination because I trust that we are all doing what we judge in the best of our analysis to be good to continue to solidly anchor inflationary expectations," Trichet said on Thursday.
"In that sense our monetary policy are associated with this particular goal of solidly anchoring inflation expectations. We are in a different universe. We have to judge, based on our own mandate, what is appropriate in the various econ-omies that we have to work inside."
Trichet holds a news conference on Monday after talks on the global economy, which are also expected to be attended by Federal Reserve officials and Bank of Japan Governor Toshihiko Fukui - his last attendance.
Some of the G10 bankers met last month at the Group of Seven finance chiefs' gathering in Tokyo where they warned that credit turmoil could still unhinge the global economy and pledged a plan of action for restoring markets to financial health.
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