July 1, 2003	Tuesday	Rabi-us-Sani 30, 1424

BASEL (Switzerland), June 30: Central bankers at the annual meeting of the Bank for International Settlements on Monday voiced confidence in an economic upturn by the end of the year, pointing to early signs of a pick-up.

The US administration’s tax policy should spark economic demand and activity in the United States from the second half of this year, BIS general manager Malcolm Knight said.

“The effect of tax cuts will help strengthen demand and activity in the second part of the year,” he told reporters.

The US tax policy will boost US demand, which in turn will have an impact on growth and investment, which has been very low for two years because of “geopolitical uncertainties”, he said.

Stronger economic activity in the United States will stimulate the economies of other countries, especially the NAFTA members (North American Free Trade Agreement), he said.

NAFTA groups Canada, Mexico and the United States.

Interest rates are also low and inflation weak, Knight highlighted.

But another leading BIS official, speaking on condition of anonymity, said the upturn was taking longer than had been forecast.

The Basel-based BIS, known as the central bankers’ central bank, has repeatedly said for nearly two years that the economic upturn should appear in the coming six to 12 months.

The US is once again expected to drive the economic resurgence which should then spread to Canada, followed by Europe and Asia.

Bank officials dismissed the risk of deflation being comparable to that of the 1930s.

Economist Bill White said that the deflation seen in some Asian countries was a secondary effect of productivity gains over the last five years due to technological progress that drives down prices.

In the 1930s the problem had been that domestic demand was very weak, Mr White commented.

The bank nevertheless recommended to members to be on their guard against the dangers of deflation, even if the risk was weak.

A governor of a European central bank likened the current deflation risk to a skier on an easy piste but near a precipice.

The annual BIS meeting also elected Jean-Claude Trichet, governor of the Bank of France, to the prestigious post of spokesman for the group of governors from the 10 most industrialized countries, plus the European Central Bank (ECB).

The job was previously held by Sir Eddie George, governor of the Bank of England, who is retiring.

In less than a week, Mr Trichet has become the official candidate to succeed Wim Duisenberg at the head of the Frankfurt-based ECB and G10 spokesman. Mr Trichet was cleared earlier this month on charges related to the near-collapse in the early 1990s of then state-owned French bank Credit Lyonnais.

The G10 meets every two months in Basel to discuss the global economic outlook.—AFP