The European Central Bank President Jean-Claude Trichet has said that he is optimistic that Europe and Asia will be able to withstand a slowdown in US growth and that the world economy is on track for a fifth year of strong expansion. Summing up the feeling of a meeting of central bankers from the Group of 10 nations, in Basel, Switzerland, Trichet said the world economy should expand at a rate similar to last year, though perhaps it would be slightly lower. The International Monetary Fund is predicting world growth of 4.9%, 2.9% in the USA, 2.1% in Japan, 2% in the euro zone and 10% in China.
At the G10 meeting the head of China’s central bank, Zhou Xiaochuan, said further steps may be needed to cool his country’s economy where he said “we have a little bit too much liquidity.” China has raised the cost of borrowing and last week banks there were ordered to keep 9.5% of their deposits as reserves so that that money could not be lent out. Federal Reserve Chairman Ben Bernanke did not speak to reporters after the G10 discussions, but a majority of economists believe the Fed will keep its benchmark rate at 5.25% this quarter and then cut it to 4.75% by the end of this year.