BIS: world economy is under threat of inflation, high rates and slowing down of growth

/INTERFAX-AFI, Moscow, July 1, 08/ - Bank for International Settlements (BIS) considers inflation as an evident threat for world economy, which may lead to increasing of interest rates, decreasing of consumers expenditures, and as a result continual slowing down of its growth. In annual report of organization, which unites representatives of CB of different countries is indicated, that now "inflation risks are higher than they were during many years". "Taking evident and current inflation threat, low level of interest rates in majority of countries into account, global bias to toughening of monetary policy occurred adequate for us" - is said in the report. At that, its authors alert that combination of growing inflation, influencing consumers` confident and credit crisis, which decreased availability of credits for companies, may lead to more prolonged and dipper slowing down of world economic growth, than expected. Domino effect in world economy increases risks for developing countries also, which especially suffer from inflation; also confront with pressure in favor of appreciation of currency, BIS alerts. Possible recession in USA may influence developing countries, which highly depend on external ask, and reducing of availability of credits will negatively affect countries, which have big deficit of payment balance. BIS considers that in this situation with inflation, central banks should increase interest rates, however, in situation when CB should struggle with inflation and risk of recession, there is no one way of action, which will suite everybody. In organization's experts opinion, in worse case if sharp slowing down of world economy will happen, there is variant for it to enter deflation period. CB representatives participate in annual meeting of BIS on Sunday and Monday, where main theme was the struggle with growing inflation and inflation expectations. Since August last year, banks focused on shock on financial market, however today acute theme was price problem, which is connected with growth of prices on fuel and foods. This week interest rate may be increased by European Central Bank - from 4% to 4.25%. [2008-07-01]