The global economy remains very dynamic although it will slow slightly from its rapid pace next year, the Group of Ten Chairman Jean-Claude Trichet said on Monday after a meeting of top central bankers. "Next year will be very dynamic, too - less dynamic than this year but still dynamic," Trichet, who also heads the European Central Bank, told reporters after a meeting of bank governors from leading industrialised and developing countries.
The takes place as worries mount in Europe that the dollar's recent weakness, coupled with a surge in commodity prices including oil, will damage economic growth.
Trichet, however, soothed some concerns by saying that no so-called second-round inflationary effects from oil prices were visible yet.
Nonetheless, central banks needed to remain cautious and vigilant about the potential inflationary threat from oil, he said.
"At the global level until now we do not see such second-round effects materialising, but we have to remain vigilant," he said, adding that maintaining inflation in-line with central banks' targets was "very important."
The most recent easing in oil prices from historic highs was "encouraging", Trichet said, adding that he would welcome further price declines as good for the global economy.
"The more we can observe the easing of the oil market the more it will be good for the global economy on the whole and for each economy in particular," he said.
Trichet said that the central bank governors did not discuss the possible impact of foreign exchange movements on the global economy.
Worries over financing the massive US current account deficit and whether high oil prices will crimp US growth has driven the US dollar down 4 percent against a basket of currencies since early October to a nine-year low.
But so far the global economy has held up well, posting its strongest performance in many decades this year of around 5 percent. A slight cooling in 2005 to around 4.3 percent global output would still be one point higher than averages for the past 20 years.
Yet the global pattern is mixed with developed economies, notably in Europe, lagging. The dollar's tumble has pushed the euro currency up by a sharp 10 percent in the past six months to a new record on Monday at 1.2984.
Several eurozone central bank officials have said this could cut 0.5 percentage points next year off already lacklustre growth of about 2.0 percent.