IMF sees US economy on track for soft landing
The International Monetary Fund said on Thursday that a "soft landing" for the US economy was a probability, although there was a "possibility" of a hard landing.
David Robinson, assistant director of the IMF's Research Department said at the presentation of the fund's World Economic Outlook that a soft landing for the US economy was a high possibility, but he noted that there was no guarantee.
"I'm saying the probability is a soft landing and there's a possibility of a hard landing, and it cannot be ruled out. But yes, I think a soft landing is highly likely," Robinson said.
He defined a hard landing as an abrupt adjustment in the imbalances which lead to a sharp decline in the rest of the world, but said the current US economic outlook was consistent with a soft landing scenario.
The IMF report stated: "Following very rapid growth of seven percent (annualized) in the second half of 1999, GDP growth moderated to five percent in the first half of 2000, accompanied by some signs of an easing in domestic demand growth.
"Nevertheless, with indicators pointing to continued strong momentum in the US economy, and labour markets still tight, a further increase in interest rates may be needed in the future to dampen inflationary pressure and to reduce the growth of domestic demand below that of potential output," the report warned.
Robinson said global economic growth for this year was expected to reach 4.25%, although capital flows continue to be volatile. He also outlined three major problems that could contribute to a slowdown in the growth of the global economy, namely the continuing increase of oil prices, large current account balances and wrongly aligned exchange rates, and richly valued equities markets. – I-Net Bridge
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