ECB Will Not Allow Inflation To Resolve Budget Deficit Problems, Bini Smaghi Says

 @ibtimes
on June 23 2009 9:12 AM

RTTNews - Tuesday, the European Central Bank Executive Board member Lorenzo Bini Smaghi said the central bank will not allow inflation to resolve budget problems and warned authorities to frame exit strategies and not to wait for further central bank rescue.

He noted that using exit strategies prematurely would be harmful and should be implemented only when the economy is out of crisis.

Bini Smaghi stated that there will not be inflation in Europe and said, We are here to prevent it. Moreover, he said financial operators must function on correct inflation expectations.

The central banker said the global economic crisis shows that a new world monetary order requires a mechanism to keep imbalances in check. According to him, there is a prominent role for the the International Monetary Fund in providing such a mechanism. He added that a new monetary order must first and foremost aim to prevent crisis, not to postpone them.

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