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UPDATE 2-Global price risks up, no common policy approach

Published 03/07/2011, 05:43 PM
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* Trichet: price risks have increased due to oil price

* U.S. policymaker won't rule out extending stimulus

* United inflation fight does not mean united policies (Adds comments from IMF's Lipsky, details)

By Sakari Suoninen and Natsuko Waki

BASEL, Switzerland, March 7 (Reuters) - A spike in food and oil prices has made the threat of inflation more acute, but that does not mean authorities need to respond to the threat in a similar manner, leading central banks said on Monday.

A top European central banker said rising energy costs were posing a threat to both emerging and advanced economies. But a U.S. Federal Reserve official said more stimulus may be needed to keep lofty oil prices from dragging down the U.S. economy.

Jean-Claude Trichet, speaking as chair of talks on the global economy at a Bank for International Settlements meeting, said the latest rise in oil prices underlined inflation concerns, though he said that so far, the global economy was set for relatively robust growth.

"Additional tensions that have been observed in the price of oil and energy are giving an additional importance to the message we had in January to the global economy as a whole," Trichet said.

"We are all devoted to continue anchoring solidly inflation expectations; that doesn't mean we take the same decisions."

A shock warning last week from Trichet, the head of the European Central bank, that the ECB could raise euro zone interest rates next month highlighted differences with the looser stance of the Fed, driving the euro sharply higher.

Fed Chairman Ben Bernanke, in a clear sign no imminent shift in U.S. policy is brewing, said last week that the rise in crude oil prices should lead to only a modest, temporary increase in U.S. inflation "at most."

On Monday, Atlanta Federal Reserve Bank President Dennis Lockhart went further, saying U.S. policymakers should not rule out further bond purchases if things worsen.

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For a graphic on 2010 commodity performances click on:

http://graphics.thomsonreuters.com/F/12/CMD_Q4.html

For a graphic showing FAO food index components:

http://r.reuters.com/baz74r

Calculator: oil impact on GDP: http://r.reuters.com/jux28r

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Lockhart pointed to the heightened economic uncertainty stemming from the political upheaval in the Middle East and North Africa. He stressed that he would be reluctant to extend the Fed's $600 billion bond-buying program past its scheduled end date in June, but said he would not take it off the table.

"Given the emergence of new risks ... I prefer a posture of flexibility as regards policy options," Lockhart said, voicing an openness to a potentially easier policy that some hawks at the Fed do not appear to share. [ID:nDYE7DH014]

The No. 2 at the International Monetary Fund, John Lipsky, told Reuters Insider that inflation expectations did not seem to be on the rise in either Europe or the United States.

He conceded, however, that if the "fear factor" pushing oil prices up lasted for a lengthy period, it could undercut global growth. So far, the IMF had not adjusted its estimate that the global economy would grow 4.4 percent this year, Lipsky said.

OIL WORRIES HIT STOCKS

U.S. crude oil futures rose nearly 1 percent on Monday to their highest levels since September 2008. Global food prices have also been rising and hit a record high in February, driven by rising grain costs and tighter supply.

The run-up in oil prices undercut stocks. The Dow Jones industrial average <.DJI> dropped about 80 points, while the Standard & Poor's 500 Index <.SPX> was down 11 points.

Trichet said different policies did not mean some central banks were abandoning their commitment to stable prices.

"There is unity of purpose and this is crystallizing in the goal of solidly anchoring inflation expectations," he said. (additional reporting by Glenn Somerville in Washington) (Reporting by Natsuko Waki, Catherine Bosley and Sakari Suoninen; editing by Dan Grebler)

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