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G8 to thrash out economic issues

Inflation jitters are already on the minds of planners in US and Europe and are likely to figure in talks.

india Updated: Jun 12, 2006 12:51 IST

The world's most influential finance chiefs gathered in a bid to dispel some of the clouds hanging over the world economy and to breathe new life into trade-based development efforts.

With world stock markets in turmoil and energy prices looming large over global growth, finance ministers from the Group of Eight — Britain, Canada, France, Germany, Italy, Japan, Russia and the US — were to meet over dinner ahead of more intensive contacts.

They are to issue a final statement that investors and analysts will scrutinise for signs that the ministerial deliberations might yield decisive action on sky-high oil prices and resurgent inflation.

The fate of the near-term world economy "will be taken up ... In relation to the energy issue", Japanese Finance Minister Sadakazu Tanigaki said.

The price of oil has tripled since the start of 2002 and is now over $70 a barrel, prompting fears that energy costs will eventually lead to a spurt in consumer price inflation.

Inflation jitters are already on the minds of financial planners in the US and Europe and are likely to figure prominently in talks.

Meanwhile the European Central Bank tightened the monetary screws further, hiking its benchmark rate by a quarter of a point to 2.75 per cent and flagging the possibility of further rises in a bid to dampen inflation in the 12-country eurozone.

US Federal Reserve Chairman Ben Bernanke earlier this week sparked a sell-off on global markets with a warning that recent US inflationary trends had been unwelcome developments, prompting speculation that the Fed—the US central bank—may hold off on a long-expected pause in its rate-hike cycle.