Fed
Federal Reserve Bank of New York President Timothy Geithner said the world economy is coping with the U.S. slowdown.
“The world is much better positioned to deal with consequences of the slowdown in the United States,'' Geithner said at a news conference in Jerusalem today. “It's looking, at least for now, very resilient to the broad pressures you see, particularly concentrated in the United States.''
The Federal Reserve has cut interest rates seven times since mid-September to fend off a recession amid a housing slump that's driven up credit costs worldwide. Geithner, with Fed Chairman Ben S. Bernanke, orchestrated the March rescue of Bear Stearns Cos. from bankruptcy and opened lending to Wall Street securities firms to prevent a financial-market meltdown.
Geithner defended the U.S. Fed's rate cuts, saying they were “absolutely correct.''
“The U.S. is going through a necessary but difficult adjustment process,'' he said. “The circumstances in each country are different and the policy responses are going to have to be different.''
In contrast to the Fed, the European Central Bank has held interest rates at a six-year high since June to fight inflation even as market turbulence threatens growth.
ECB President Jean-Claude Trichet, speaking at the same news conference as Geithner, said the market correction is “ongoing.'' Trichet also reiterated the “concern'' of the Group of Seven nations about “sharp fluctuations in major currencies'' after the euro rose to a record against the dollar payday loans.
G-30 Meeting
Otherwise, Trichet and Geithner declined to address questions relating to monetary policy. They were attending an event in Jerusalem hosted by the Group of 30, a private group mainly of current and former central bankers.
The world economy is better able to cope oil shocks today than it was in the 1970s, said Jacob Frenkel, the G-30's chairman and vice chairman of American International Group. “The lesson is that we need to make economies more flexible,'' Frenkel said.
Oil surged above $130 a barrel last week.
The rise in world commodity prices isn't a speculative “bubble,'' said Tommaso Padoa-Schioppa, who was finance minister in Italy's previous government. “The price movements are due to increasing pressure of demand and improved living standards in vast areas of the world,'' he said.
Geithner said the world's biggest central banks and financial regulators are making an “impressive effort'' to build an “early consensus'' about reducing the vulnerability of the world economy to financial crises. Still, regulators need to find a “better balance'' between supervision and relying on market discipline, he said.