In the Group of Twenty (G20) before the summit, the major economies at the local central bank governors in Basel on the 8th meeting of the global economic situation, the European Central Bank President Jean-Claude Trichet said the central bank the world’s major economies to agreement to contain inflation expectations. Fed printing press start again, the problem of excess global liquidity growing, will further lead to global inflation and global cross-border capital flows.

The central bank claims to curb inflation

Countries from Asia and South America, officials have warned that the Fed injected more liquidity to the U.S. economy will lead to the decision of the dollar, prompting capital flows to emerging markets, such capital flows will lead to asset price bubbles in emerging markets are facing, and the threat of inflation. However, Trichet said the Fed’s decision to buy more government bonds is its willingness to stabilize inflation expectations, not to devalue the dollar, there is no weakness in any country in the active implementation of monetary policy.

In a new round of Fed policy of quantitative easing, the dollar exchange rate continued weakness, the international price of gold broke through $ 1,400 an ounce mark. Some analysts said Trichet’s remarks intended for the Fed “defense” and to ease public concerns about the currency war imminent. However, the Fed made a lot of dollars and does not remain in the United States, a lot of money has poured into emerging markets, rising commodity prices is pushing up inflation expectations in emerging market countries.

In this regard, Trichet said that the world’s major developed economies and developing economies, central bank governors agreed to curb inflation, central banks from developed economies governor could accept no more than 2% inflation rate.

At present, European and American countries are still facing inflationary pressure is not. German Federal Statistics Office data released yesterday showed that the basket of goods under the EU standard is calculated to reconcile Germany’s October consumer price index rose a revised 1.3% annual rate. It is reported that the ECB is closely watching changes in the index to maintain the euro-zone inflation below 2%.

Containment of hot money in emerging markets

Federal Reserve to further relax monetary policy to hot money pouring into the capital markets in emerging economies, emerging market economy to imported inflation and to their recovery and security. Some analysts said the rate hike to fight inflation is the “tool”, but the emerging central banks should be cautious and lines. Hot money inflows in emerging markets should take reasonable and orderly monetary tightening policy, and to consider appropriate to allow the currency appreciation, currency intervention and other measures.

Following the International Monetary Fund (IMF) cries of capital controls, the World Bank Executive Directors Mulyani yesterday warned that quantitative easing will force the United States to take temporary control of the Asian countries to curb asset bubbles. China’s State Administration of Foreign Exchange also issued a notice calling for strengthening foreign exchange management, cross-border capital flows to prevent financial risks.

Trichet also said that while central bankers on capital inflows were discussed, but never used the “currency war” language. In addition, central bankers to avoid excessive exchange rate agreed on the need for shocks, countries should also be alert to the process of economic recovery in the world of uncertainty and risk.

Another source said yesterday, the Russian central bank to curb inflation, plans to increase frequency of short-term debt auction.

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