Chinese central bank governor Zhou Xiaochuan offered reassurance about the outlook for China, saying the impact on its economy was 'very limited' given Chinese banks were not significantly exposed to sub-prime investments.BASEL (Switzerland) - Central bankers are in a holding pattern awaiting clear signs of how the last month of market upheaval has affected the economy, policymakers said on Sunday.
Central bankers gathering in the Swiss city of Basel for regular talks on the global economy said a wait-and-see stance was the best approach given current volatility.
Financial markets have been in turmoil since mid-August as concerns about a fallout from US sub-prime mortgages hit banks globally and triggered a sell-off in risky assets.
Chinese central bank governor Zhou Xiaochuan offered reassurance about the outlook for China saying the impact on its economy was 'very limited' given Chinese banks were not significantly exposed to sub-prime investments, but he added that the impact on the global economy was uncertain.
'If the global economy is seriously jeopardised then certainly China can get some impact but that's something we don't know,' he told reporters on the sidelines of the talks at the Bank for International Settlements.
The European Central Bank, the Bank of England and the Bank of Japan held off from raising interest rates at their latest policy meetings as they awaited a clearer reading on how the economy was likely to weather the turbulence.
Shockingly weak US jobs data on Friday triggered another round of falls in stocks and the dollar, sending safe-haven bonds prices sharply higher. The data also cemented expectations the US Federal Reserve would cut interest rates later this month, pushing short-dated US yields to two-year lows. The dollar hit a 15-year low against major currencies.
Investors are, however, still betting that the ECB will resume its rate hike cycle once the turbulence abates, especially after Bundesbank President Axel Weber said on Friday that postponing a hike was not the same as cancelling it.
ECB policymakers said on Sunday that the economic outlook in the 13-nation region was more uncertain given the market upsets, but they were waiting for more information before changing their view of a generally favourable outlook.
Ireland's John Hurley also said it was too early to change his view on the outlook for the euro-zone, which ECB staff expect to grow at around 2.5 per cent this year.
ECB President Jean-Claude Trichet, Bank of Japan Governor Toshihiko Fukui and Fed Chairman Ben Bernanke are also present at the Basel talks but did not speak to reporters.
Emerging markets have proved so far quite resilient to the turmoil. Although stocks have sold off and spreads widened, the impact has been limited compared with previous market upheavals.
Hong Kong Monetary Authority Chief Executive Joseph Yam said this could be because debt markets were not as developed, and economists say improved balance of payments and strong growth may also have played a role. -- REUTERS
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