Central bankers from the world's major economies think the strong dollar is harming the US economy and fuelling inflation in the euro zone, Bank of England Governor Sir Eddie George said today.
"The combination of exchange rates is having in many senses perverse effects. It was one of the factors contributing to the imported inflation in the euro zone, which is a factor dampening consumer spending," Mr George said.
"Equally it is a factor which is exerting a negative effect on the US economy through the trade accounts, he said after chairing a regular meeting of central bankers from the Group of 10 industrial nations."
The euro firmed slightly versus the dollar on the comments - some of the most pointed recent official statements on exchange rates - and was trading at 84.57/67 cents around 12.05 GMT.
"Central bankers gathered at the Bank for International Settlements (BIS) in Basel also thought US inflationary pressure seemed contained, offering scope for more U.S. rate cuts if needed," Mr George added.
"The sense was that inflationary pressures were not apparent and that they are likely to be that the scope, if there were to be a softening, for further support would still be there."
Mr George reiterated that G10 central bankers expected the US economy to pick up in the second half of this year and into next year, echoing the sentiment expressed at the weekend by finance ministers from the Group of Seven leading industrial countries.