Fed's Mishkin says forex swings inevitable

OSLO (Reuters) - U.S. Federal Reserve Board Governor Frederic Mishkin said on Friday that foreign exchange fluctuations were inevitable and that sometimes media reaction was "over the top".

"Exchange rate fluctuations are not a problem unless they actually lead to reallocation of resources," Mishkin told a financial seminar in the Norwegian capital in a question and answer session after giving a speech.

"Fluctuations in exchange rates are something that you have to deal with, but as you know sometimes the media make a huge deal of fluctuations that is way over the top."

The dollar has plunged against the euro.

He also said that much of the economic growth and stability of the past years was due to increasing worldwide focus by central banks on containing inflation.

"The issue which is extremely important is the preservation and commitment of an nominal anchor," he said. "If you have a strong nominal anchor, people expect inflation to be at a certain level in the future."

He said that economic outcomes would be much worse if a central bank lost its nominal anchor, but did not define a threshold for when the price anchor was at risk.

The Federal Reserve has slashed interest rates by 225 basis points since September in a bid to prevent the U.S. economy from slipping into recession, leaving some analysts to question how committed it is to fighting inflation.

(Reporting by Wojciech Moskwa, writing by Alister Doyle, editing by David Christian-Edwards)