The world economic recovery is strong and risks that it could be derailed are fading, top central bankers said on Monday.
Central bankers from the Group of 10 leading industrial nations and their counterparts from top emerging economies were optimistic the downturn which followed a prolonged stock market slump was over, despite a weak US jobs report last week.
"The sense of the meeting today was that the sustainability of the recovery at the global level was certainly not to be put in question," said European Central Bank President Jean-Claude Trichet, who is spokesman for the G10 central bankers.
"We have a strong recovery," he told a news conference in comments that reinforced upbeat messages from other international agencies. His remarks at the central bankers' meeting in the Swiss city of Basel helped to allay fears the weak US labour market was a sign that America's recovery is more fragile than thought.
Last week the International Monetary Fund said there were potential "upside surprises" in the global economy. The Organisation for Economic Co-operation and Development was also optimistic.
Asian central bankers were likewise upbeat. Arriving for the meeting, Bank of Japan Governor Toshihiko Fukui said his country's economy was improving moderately, despite the continued risk of deflation. China expects its economy to grow in the seven to eight percent range this year, said Li Ruogu, the deputy governor of China's central bank.
Trichet warned, however, that global investors are taking on a lot of risk and that the central bank leaders would be watching developments closely.
"We consider that it is true that the risk appetite of global investors is at a level that is significant in historical terms," he said. "We have to observe this evolution and to be vigilant, but we are not alarmed."
Trichet's comments echo those on Sunday by the Bank for International Settlements (BIS), a forum for the world's central banks and host of the G10 meeting.
It warned that investors were extending themselves in a search for high returns more than economic fundamentals might merit and this had driven a global equity rally in 2004.
Share prices have outpaced company earnings improvements for about a year, pushing some valuations beyond historical averages, said the BIS, whose views are seen as reflecting a consensus among monetary authorities.
Policymakers are pondering what role central banks should play as markets rise, either through bursting bubbles, deflating them gently, or standing by.
International fund managers have begun to voice concern that cheap money in Japan, Europe and the United States has fuelled a rush into riskier assets that could unwind dangerously when interest rates in the top industrial countries start rising.
Trichet said the governors viewed commodity prices without alarm or fear that they signalled inflationary pressure.
"It is certainly a reflection of the quite robust episode that we are experiencing at the level of the global economy," he said. "We think that the overall picture calls for not being overall very alarmed but being very vigilant (about commodity prices)."
Oil prices held near post-Iraq war highs on Monday as low US gasoline stocks and unrest in Opec member Venezuela heightened fears over supplies for the summer, when Americans push up demand by taking to their cars for long journeys.
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