The Hindu Business Line : <I>Central banks need to target inflation: Weber </I>

Emerging economies like India, with high GDP and per capita growth are prone to the relative risks of high inflation, said Mr Axel Weber, Governing Council Member, European Central Bank.

India's inflation for the week ended March 3 has risen to 6.46 per cent against 6.1 per cent previous week.

Excess liquidity flocks to the asset markets and leads to a rise in asset prices, said Mr Weber. "Disorderly unwinding of excess liquidity leads to further pressure on inflation. We have observed that liquidity and asset price development, particularly in the housing market, are closely linked," he said.

Mr Weber said though monetary policy strategies across the world are diverse, central banks needed to lower inflation so that other policy objectives could be achieved.

Talking about inflation in the Euro zone, Mr Weber said it is likely to be higher in the medium to long term.

"This year inflation in the Euro zone will probably fall to around 1.5 per cent. Then we could see a strong pick-up in inflation and it could well surpass 2 per cent at the end of 2007 and into 2008," he said.

"At the moment, I see a certain risk of somewhat stronger inflation ahead, even though a short-term picture looks somewhat benign," he pointed out.According to him, the projected inflation in the Euro zone for 2008 is around 2 per cent.

More Stories on : RBI & Other Central Banks | Economy

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Banks legally bound to make temporary hands permanent: HC

Forex reserves dip $224 m

Rupee strengthens

Lok Sabha okays Bill to replace SLR ordinance

Central banks need to target inflation: Weber

ICICI, Subhiksha launch food card

Kotak Mahindra is primary dealer

New Canara Bank branch in Mumbai

Syndicate Bank launches `no frills' savings scheme

Bond prices drop by 19 paise

Call soars to 9.5-10%

Kodagu takes to `no frills' banking