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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: $Mogul who wrote (94647)	5/31/2008 5:56:39 AM
From: Haim R. Branisteanu	Read Replies (2) \| Respond to of 110194

ECB's Draghi:Too Early To Say Financial Turbulence Is Over ROME -(Dow Jones)- European Central Bank board member Mario Draghi Saturday said the recent buildup in inflationary pressures following the sharp rise in energy and food prices, coupled with the U.S. economic slowdown, represented the major threats to the world economy. He added that it was too early to say whether financial turbulence was over. "The principal source of concern remains the continued rise in the price of energy and other raw materials," said Draghi, who heads the Bank of Italy and the Financial Stability Forum, a global panel of regulators charged with monitoring the financial market crisis. The inflation rate in the euro zone hit a 16-year high in May as oil prices surged, reinforcing a growing consensus that the ECB won't cut its key interest rate this year. Consumer prices in the 15 countries that use the euro rose 3.6% from a year earlier in May, keeping the rate above the ECB's target ceiling of just under 2% for the ninth straight month. Draghi, who helps set ECB monetary policy in the 15-country euro zone, said the central bank had successfully managed to keep inflation under control, with higher consumer prices not translating into higher wages for now. "The firm anchoring of inflation expectations has allowed the European Central Bank to keep interest rates unchanged for quite some time, thus helping to support the economy," Draghi said, adding the ECB remains firmly focused on its medium-term price stability objective. His remarks are likely to reinforce expectations that the ECB will continue to keep rates on hold this year. While the U.S. Federal Reserve and the Bank of England have cut interest rates in recent months to boost economic growth, the ECB has left its main rate unchanged since June 2007 to keep a lid on inflation. Turning to the market crisis, Draghi said it was too early to say whether the financial turbulence was over. He said that although tensions in some markets were easing, normal conditions have yet to be restored. "The financial turmoil that swept over the major advanced economies brought to an end a long period of growth, low inflation and plentiful credit. It is too early to say that it has passed," Draghi said, adding it was also too soon to assess its full impact on the world economy. The central banker said that the financial system that will emerge from the current crisis must have different rules, less debt and more capital. As head of the Financial Stability Forum, Draghi last month presented a report to the Group of Seven leading industrialized nations that included a series of recommendations for major financial firms, central banks, regulatory bodies and other groups to improve transparency in the financial system and address lax risk-management practices that contributed to the current market crisis. -By Luca Di Leo, Dow Jones Newswires; +39-06-6782543; luca.dileo@dowjones.com