Wednesday, August 31, 2011

Central Bankers Worry Economy Still in Peril

After four years of fighting crises and pumping money into the financial system, the world's central bankers are concluding that the global economy is still in a precarious position and the policy apparatus is ill-equipped to help.

The mood here in the Grand Tetons, where central bankers and private economists from around the world gather each August, was distinctly gloomy.

The angst was underscored in a blunt speech by the International Monetary Fund's new managing director, Christine Lagarde. "We risk seeing the fragile recovery derailed," she said Saturday. Those risks have been aggravated, she said, by the public's sense that policy makers' response has been inadequate. "We are in a dangerous new phase," the former French finance minister said.

WSJ's Paul Vigna previews the day in markets activity, including how Asia reacted to Federal Reserve chairman Ben Bernanke's comments about the health of both the U.S. and the world economies. AP Photo/Reed Saxon

What Ms. Lagarde said publicly, several central bankers expressed privately. The central bankers' problems are compounded by internal divisions and current realities. Several U.S. Federal Reserve officials have doubts about how much more they can do to resuscitate a U.S. recovery that is falling short of Fed expectations. Most European Central Bank officials believe the solutions to Europe's sovereign-debt, governance and banking woes lie with elected leaders, not the ECB. more