The world economy is on track for a fifth year of strong growth, and risks of an upset are low, central bankers from the world's leading economies agreed this afternoon.
Summing up the sentiment at talks hosted by the Bank for International Settlements, Group of 10 chairman Jean-Claude Trichet said the outlook for 2007 was very encouraging.
Group of 10 chairman Jean-Claude Trichet
"We continue to observe in the baseline growth which is one of the most encouraging we have observed," he said. "(Risks) are of a low probability . . . but each of these risks, if they would materialise, would be grave."
Central bankers could not afford to be complacent, however, given that inflation pressures remained at a global level and liquidity was abundant.
"We do not declare victory. We do have to remain alert," Mr Trichet said. He added though that the current period of high liquidity was exceptional and due to savings growth outpacing investment.
Mr Trichet cited a disorderly unwinding of global imbalances and market underpricing of risk, plus the outlook for oil and commodity prices as dangers to growth, along with a trend to more protectionism in trade and foreign investment.
Economists question whether a US housing market slowdown, the danger of further oil price increases or a possible US dollar rout would ripple through the rest of the world economy and upend an otherwise robust global picture.
But Mr Trichet played down these dangers, saying central bankers expected the slowing of growth in the United States to be limited, and domestic dynamism elsewhere - including in the euro zone - meant the global economy would absorb the cooling.
Mr Trichet said 2007 global growth could be similar to 2006, perhaps a bit lower - in line with the International Monetary Fund's expectations for growth to ease to 4.9 per cent this year from 5.1 per cent in 2006.