Trichet says commodity price surge represents global inflation risk UPDATE

Fri, Mar 7 2008, 08:36 GMT
http://www.afxnews.com

(Updating with comments on downward pressures on manufactured goods prices)

PARIS (Thomson Financial) - European Central Bank president Jean-Claude Trichet said the recent surge in commodity prices represents a global inflation risk.

"The current surge in commodity prices, including food more recently, which is resulting in particular from supply being unable to match higher demand from emerging markets, reminds us that globalisation can also lead to risks to world inflation," he said in a speech at a Bank of France conference.

Trichet also said the ECB is closely monitoring the ongoing correction in financial markets and will take account of its impact on inflation.

"We are very closely monitoring the ongoing significant market correction we have experienced since the middle of last year, taking into account all their possible consequences including on inflation," he said.

Although rising commodity prices represent an inflation risk, globalisation has had a downward impact on manufactured goods prices. Trichet said this effect may be weakening but is still evident.

"The most recent developments in manufacturing import prices suggest that globalisation continues to have a dampening effect on inflation of manufactured goods prices," he said.

"Although there are signs that this effect is weakening, the share of imports from low cost countries in the euro area has continued to increase," he said.