Rato warns of further sharp rises in oil prices
7/4/2005 11:34
International Monetary Fund chief Rodrigo Rato warned here Wednesday that
further sharp increases in oil prices may have more serious effects on global
growth.
The impact of record-high oil prices on global growth and inflation
has so far been "manageable", Rato said in a speech at Georgetown
University.
"But further sharp increases may have more serious effects:
looking forward, supply and demand will remain in balance at best, with limited
prospects for building spare capacity, and the oil market will remain vulnerable
to shocks," he said.
He noted that oil-producing and consuming countries need
to work together to ensure oil market stability by strengthening energy
conservation, reducing obstacles to investment, and improving data
transparency.
As to rising interest rates in the United States, Rato said the
Federal Reserve was right to worry about evidence of inflationary
pressure.
"A sharp increase in US interest rates, for instance prompted by a
rise in inflationary expectations or weaker demand for US securities, would
adversely affect the (global) expansion and lead to a significant deterioration
in emerging market financing conditions," he said.
He also said that the Bush
administration needs to do its bit to rectify swelling deficits in the US
balance of payments and federal budget, describing the huge current account
deficit as a " mounting concern".
However, it is not for the US government
alone to re-balance the world economy. Rato said that Europe and Japan must do
more to shore up their legs of the global system to prevent growth being "
unduly dependent on the United States and China".
"Today's global imbalances
are a problem of global disequilibrium, requiring actions to be taken by several
key economic actors," he said.
Xinhua
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