Speaking in his capacity as the chairman of the Group of 10 (G10) central banks from leading economies, Jean-Claude Trichet said that the problems being seen in the money markets would require private sector action to be rectified.
Trichet said: “It calls for progressive appropriate corrections by the private sector itself in particular. We will remain alert, taking into account what we can do and how we can help, which is permitting the functioning of the market to improve progressively.”
In December, five central banks – the European Central Bank, the Bank of England, the US Federal Reserve, the Swiss National Bank and the Bank of Canada – delivered a coordinated move to pump extra liquidity into the markets.
Trichet said that central banks should continue to be cautious over the threat of rising inflation through ever increasing food and oil prices. This is despite his view that overall global economic growth remaining robust, even if some slowing was evident. He explained: “To sum up our analysis I would say: no complacency as regards to inflation, and no complacency with regards to the question of the significant correction in the markets.”
Ray Boulger, senior technical manager at John Charcol, said that strains within the euro zone were increasingly evident and that this was something that the European Central Bank would have to think about in the short to medium term.
He commented: “At the end of the day, a national institution is going to do what is best for itself, but there are some encouraging signs that the situation is improving. One worry Trichet will have to think about is that, nine years after the European Central Bank was formed, we still have significantly varying economies.
"Increasingly, the strains within the euro zone will become apparent and rather than coming together, countries are moving apart.
“A large part of the problems facing the European Central Bank are also affecting us. Although in the short-term the Consumer Price Index will increase, it looks highly unlikely to test the 3 per cent barrier. But in the financial services market, the unexpected can and does happen.”
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