Paulson: inflation becoming top global focus

Treasury Secretary Henry Paulson speaks to Russian President Dmitry Medvedev (not pictured) in the Kremlin in Moscow June 30, 2008.

LONDON (Reuters) - U.S. Treasury Secretary Henry Paulson said on Thursday inflation was becoming the top economic focus of many countries around the world as oil and food prices take their toll.

"When you look around the world broadly, I think inflation is the issue that, as I go around the world, is getting the number one focus, getting the number one focus," Paulson said in a television interview with BBC Newsnight.

"When you look at not just oil prices, but food in areas where there's poverty, this is a huge problem."

Paulson, finishing up a five-day trip to Russia, Germany and Britain, told Newsnight that inflation was of major concern to Russia, whose inflation has soared to a 15 percent annual rate recently, and to China.

But Paulson said in a separate BBC radio interview that for the United States and Britain, the downturn in the economy is a greater worry than inflation at the moment,

"We are in both of our economies very focused on the downturn right now, particularly in the U.S., our biggest concern is the downturn," he said.

"There is no doubt that high headline inflation numbers as it relates to oil and food prices are a real concern to Americans. But core inflation is relatively contained and my biggest focus today is on the downside risk which are housing, oil prices and obviously what is going on in the capital markets."

He told Newsnight that he was not concerned at the moment about another major Wall Street investment bank failure along the lines of Bear Stearns, despite calling on Wednesday for new regulatory procedures that would allow for a major investment bank failure without threatening the financial system.

He reiterated his view that central banks should independently make interest rate decisions.

"I just have great reverence and respect for the independence of our central banks -- your Bank of England and our Fed. They've got tough jobs to do," he said.

Paulson also defended President George Bush's economic and alternative energy policies, saying he was particularly supportive of Bush's stance favoring open investment and trade and his focus on new energy technologies and tax incentives for alternative fuels.