Ex-Fed chief pins hopes on technology
PEGGY SITO
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The United States economy will be saved from a slip into recession this year by its strong fundamentals, according to former US Federal Reserve Board vice-chairman Alice Rivlin.
Monetary policy and expected developments in the telecommunications sector would bolster the economy in the next 12 months, said Ms Rivlin, a senior fellow at US think-tank the Brookings Institute.
"For some people it looks like a downhill economy, but not for me," she said yesterday at an Asia Society Hong Kong Centre luncheon.
Economic growth in the US could slow for two to three quarters this year, but they would not be negative quarters, Ms Rivlin said.
Monetary policy could be used as a support and additional help would come from an expected rate cut when the US Federal Reserve meets this month, she added.
Last week, the Federal Reserve lowered the Fed rate by 50 basis points to 6 per cent and the discount rate fell 25 basis points to 5.75 per cent.
The recent rate cut was "a quick, bold move and was a very good thing to do", Ms Rivlin said.
Ms Rivlin also said she expected President-elect George W. Bush would support free trade and that would help the economy.
"The Bush administration will not be in the regulation business. It will conduct more deregulation. Bush's team is very free market-oriented," she said.
However, she did not favour Mr Bush's tax cut plans, saying tax cuts were not a good prescription for preventing a recession.
Ms Rivlin also expected the Internet sector to continue its impact on the US economy.
"I don't think the technology cycle has run out of steam, we still have a lot of new inventions. The impact of the Internet is still largely to come," she said.
Ms Rivlin said she was not surprised by the recent US stock market falls, saying a correction was needed to bring prices in line with earnings.
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