N W -- now we have world financial leaders begging AG for 1/2 point- check the article,,,
(REUTERS) DAVOS-Leaders urge Fed to save world from recession
DAVOS-Leaders urge Fed to save world from recession
By David Crossland
DAVOS, Switzerland, Jan 28 (Reuters) - Global business and
finance leaders gathered at the Davos World Economic Forum
summit are pinning their hopes on aggressive interest rate cuts
in the United States to save the world from recession.
But they hold out little hope that Japan, the world's second
largest economy, can make a quick recovery from its slowdown as
its interest rates are already at zero and public debt is too
high to allow further big fiscal stimulus packages.
One top International Monetary Fund official said the IMF
was preparing to lower its world growth forecast for 2001 to
around 3.5 percent from 4.2 percent.
Days before the Federal Reserve's FOMC policy-making council
meets on January 30-31, economists, finance officials and
business chiefs said they were confident the Federal Reserve
will keep cutting interest rates.
Lower borrowing costs, combined with planned tax cuts by the
new U.S. administration, would help revive U.S. growth from
mid-2001, they said.
"Another half-point cut would be the best policy at the next
FOMC meeting," said Robert Mundell, an economist who won the
Nobel Prize for Economics in 1999.
French Finance Minister Laurent Fabius said he saw plenty of
scope for more U.S. cuts, while IMF deputy head Stanley Fischer
said the Fed had room to cut rates by as much as five points if
necessary without stoking inflation.
"Not that I think that will be necessary," Fischer added.
The threat of world recession and the prospect of
anti-globalisation protests spoilt the usually cosy atmosphere
at the annual meeting of the world's business and political
elite in this Swiss ski resort.
Hundreds of police and kilometres of barbed wire surrounding
the conference centre added to the sense of gloom and clashed
with the Forum's lofty theme this year, "Bridging the Divides."
In the event, protestors and police fought each other in Zurich.
PLEAS GO OUT TO FED, OPEC
Delegates also urged OPEC oil producing nations to help
prevent a repeat of the oil price surge last year that helped
bring economic growth in the U.S. to a screeching halt.
German Finance Minister Hans Eichel said on Saturday if oil
prices stabilised at levels seen in recent weeks it would be a
"big plus" for the world economy. "I'm sure OPEC is aware of its
responsibilities," Eichel said.
OPEC's response appeared reassuring. Saudi Oil Minister Ali
al-Naimi said he expected OPEC would succeed in maintaining the
price of OPEC oil around $25. OPEC, which cut oil output by five
percent this month to help support prices, aims to keep the
price in a range of $22 to $28.
The Fed is now widely expected to deliver a half-point cut
at its upcoming meeting, the second cut this month after it
lowered its Fed funds rate on overnight lending by half a point
to 6.0 percent on January 3.
Fed Chairman Alan Greenspan stoked rate cut expectations
last week when he said U.S. growth may have slowed to near zero.
Fischer, echoing other analysts at the Forum, said the world
was still far from the kind of recession seen in the early 1980s
and 1990s.
ECB STEADY FOR NOW, BUT LESS HAWKISH
Fischer stopped short of urging the European Central Bank to
cut interest rates, saying that despite a slowdown in European
growth during the second half of 2000, its economic position
looked "pretty strong."
He added: "Inflation will be restrained by the stronger euro
and by lower energy prices, and wage growth remains moderate, so
there is scope for interest rate cuts if activity weakens or the
euro appreciates markedly."
ECB officials have made clear they will not cut interest
rates for the time being but acknowledged price pressures in the
euro zone are easing, fuelling speculation of a cut over the
next six months.
DOUBTS ABOUT JAPAN
Fischer said Japanese GDP may have contracted slightly in
the final quarter of 2000 after a sharp slowdown in the previous
two quarters.
The main weapon left to Japan was restructuring of the
economy, particularly banks, corporate debt and corporations,
although the turnaround would not be rapid, he said.
Japanese Prime Minister Yoshiro Mori told the Forum on
Saturday that the 1990s had been "a lost decade" for Japan in
which its citizens lost an estimated 1,000 trillion yen ($8.55
trillion) through falling equity and land prices alone, an
amount twice that of Japan's GDP. |
