LONDON/FRANKFURT (Reuters) - The end to the credit crunch is still not in sight, European Central Bank President, Jean-Claude Trichet and Warren Buffett, the world’s most famous stock market investor, warned on Monday.
“These are demanding times, challenging times... It is an ongoing, very significant market correction,” Trichet told BBC radio in Britain.
Buffett, whose years of shrewd investing have earnt him a fortune estimated at $62 billion by Forbes magazine and the nickname “the sage of Omaha”, struck a similar tone at a news conference in Frankfurt.
“I’ll talk about the United States. I don’t think the effects of the credit crunch are far from over at all. I think there will be rippling secondary, tertiary effects.”
Trichet and Buffett’s comments come after U.S. Federal Reserve Chairman Ben Bernanke said last week the healing process from the credit crisis would take some time.
Deutsche Bank’s Chief Executive Josef Ackermann was more upbeat however in an interview over the weekend.
“I think that we are getting closer to the end of the financial crisis,” Ackermann told the Swiss Sunday newspaper Sonntagsblick. “It is not fully over yet, but the signs from the United States are encouraging.”
With market turbulence persisting, Trichet added governments and financial decision makers needed to keep an iron grip on oil and food price fuelled inflation.
“We have this accumulation of the oil shock, the food and agro-products shock... Price stability and credibility in price stability in the medium term is the best way to have a high level of sustainable (economic) growth and sustainable job creation.”
Trichet also warned governments not to make the wrong moves and risk the knock-on “second round effects” of inflation, such as higher wages, which followed the last oil price shock in the 1970s.
These, he said, had “enshrined the high level of inflation for a long period of time” and led to mass unemployment in Europe.
Oil prices remain within sight of $130 a barrel because of unrelenting demand, speculative buying, global tensions and supply snags.
The surge is causing widespread headaches for the global economy by pushing up the price of almost everything and is creating a number of problems for Trichet’s ECB and other central banks.
While some of the 15 euro zone countries look in danger of following the U.S. into a sharp economic slowdown, near record inflation in the region has given the Frankfurt-based central bank little room for maneuver with regards to interest rates which have been on hold at 4 percent for the last 11 months.
Reporting by Kate Kelland and Jonathan Gould. Writing by Marc Jones and Mike Shields, Editing by Tim Castle/Gerrard Raven