Trichet Sees Global Recovery in 2010, Urges 'Confidence'
By NATASHA BRERETON
BASEL, Switzerland -- European Central Bank President Jean-Claude Trichet said global economic conditions are likely to recover substantially in 2010 after weakening further this year.
Mr. Trichet, after leading a meeting on the global economy at the Bank for International Settlements Monday, said financial markets aren't yet fully pricing in supportive action taken by governments and central banks.
"If there is an overall sentiment that the global economy will slow down significantly in '09, with the industrialized economy having negative figures probably, it is also noted that 2010 should be the year of the recovery," Mr. Trichet said.
Emerging-market economies are slowing but remaining resilient as a group and continuing to contribute to global growth, he said.
The comments came as the Organization for Economic Cooperation and Development said its leading indicator for its 30 members fell again in November. The indicators for each of the world's seven largest economies as well as nonmembers China, India, Russia and Brazil also fell.
Attendees at the global economy meeting in Basel felt moves by central banks and governments to stabilize the financial system "have proved efficient to avoid a meltdown, and this was progressively priced in by the financial sphere, by financial institutions and by markets," Mr. Trichet said. "But we were, in our opinion, far from having markets fully pricing in all those very important decisions that have been taken."
It remains crucial that confidence is restored, Mr. Trichet said. "I would say that all colleagues would very much consider that in the present situation, more than ever, confidence is of the essence, that a large part of the slowing down that has been observed comes from the confidence channel," he said. "It is important for all authorities, including of course ourselves, to do whatever is appropriate to preserve confidence, reinforce confidence and permit the channel of confidence to function positively again."
Analysts expect the ECB, which has lowered its key rate to 2.5% from 4.25% since October, to lower the rate to 2% at its meeting Thursday. But policy makers have given no clear signal about their decision, and a number have expressed reluctance to deliver more big cuts quickly.
—Paul Hannon contributed to this article.