World Bank President: Inflation A Risk To Recovery

ELAINE KURTENBACH

SINGAPORE (AP) — Asian economies must handle their monetary and currency policies carefully to avoid unleashing a wave of potentially destabilizing inflation, World Bank President Robert Zoellick said Friday.

The U.S. and European economies, which are barely starting to recover from the global meltdown, are less at risk, but in Asia the massive liquidity flowing into regional markets could push asset prices up dangerously high, Zoellick told a business forum on the sidelines of the Asia-Pacific Economic Cooperation forum.

"In this region some care must be taken because as we get recoveries ... we could see inflation or some flow into commodities markets or certain asset price markets," Zoellick said.

Stimulus spending and loosened credit and monetary policies have helped spur a recovery in the region, especially in India and in China, which clocked growth at 8.9 percent in the third quarter.

Zoellick noted that Asian central banks, which normally take their cues from the U.S. Federal Reserve, are doubly reluctant to raise interest rates to fight inflation because that will likely push the values of their currencies higher — weakening the potential for growth in their exports by making them less competitive.