VIENNA Jan 26 Capital flows into some emerging
markets have created a "concrete risk" of asset bubbles there
and in some commodities markets, European Central Bank
Governing Council member Ewald Nowotny was quoted as saying on
"There are indeed concrete risks of asset bubbles in many
emerging countries, caused in particular by significant inflows
of short-term capital," Nowotny said in an interview with
German newspaper Financial Times Deutschland.
He pointed to similar risks on some commodities markets,
"where rising demand from Asia, but also speculation, has
created the risk that bubbles are building up."
European stockmarkets, which soared last year after
reaching multi-year lows in March, are not in bubble stage
since they only recouped losses suffered in 2008 and early
2009, Nowotny told the newspaper.
Nowotny said the main way to address those potential
bubbles was regulation.
He named banks' proprietary trading -- a key target of the
Obama administration's reform proposals for banking supervision
-- as one possible driver of bubbles. He recommended higher
capital requirements to curb it.
Nowotny reiterated that the ECB would drain liquidity
injected last year in a cautious manner: "We are proceeding
very carefully, to avoid new turbulence. Our goal is clear, we
want to avoid shortages," he said.
He reiterated he currently saw neither inflation nor
deflation risks for the eurozone.
Asked by the newspaper about market expectations the ECB
would wait to tighten monetary policy until the U.S. Federal
Reserve started raising rates, Nowotny said he would not
recommend taking this order for granted.
"There is certainly no law that says the ECB won't act
before the Fed does," he said.
(Writing by Boris Groendahl; Editing by Andrew Hay)