More financial market volatility could pose a major danger to world growth, European Central Bank Governing Council member Erkki Liikanen said today.
Although the market turmoil of the past two months had had only a limited impact on growth so far, Mr Liikanen warned the impact could worsen if the turmoil carried on.
"Recent turmoil in the financial markets has increased the risk of slower growth in the euro zone, " he said, presenting updated economic forecasts from Finland's central bank, which he heads.
"If the volatility of financial markets continues and strengthens, economic growth can become significantly weaker internationally and in Finland."
His comments build on ECB President Jean-Claude Trichet 's assessment last week that risks to euro zone growth are on the downside, due largely to the upheavals in financial markets as fears of contagion from the US subprime crisis have spread.
Other policymakers speaking today made no comments likely to change economists' assessment that interest rates are on hold at 4 per cent for the foreseeable future as the ECB waits for a clear view of how the economy will weather the turmoil.
In Brussels, Mr Trichet said inflation expectations were solidly anchored and declined to answer questions about the strong euro, saying he had nothing to add to previous comments.