US hopeful of soft landing
Interest Rates Unchanged
The U.S. Federal Reserve has left interest rates unchanged at 5.25 per cent for the fifth time running. The widely expected move comes amid signs of the US economy staying reasonably strong and inflation being more under control. While recognizing “somewhat firmer economic growth” and “signs of stabilization” in the housing market, the rate-setting Federal Open Market Committee has expressed growing confidence that inflation is running lower. "Readings on core inflation have improved modestly, and inflation pressures seem likely to moderate over time," the central bank said. At the same time, it also repeated its caution that "some inflation risks remain" - a sign that it is likely to keep its benchmark rate at current levels for the near future (or, may even raise further). The US economy grew faster than expected in the last three months of 2006, as increased consumer spending offset a housing market slowdown. The GDP rose at an annual rate of 3.5% from October to December, while the growth rate for 2006 as a whole was 3.4%, more than 2005's 3.2% expansion. The Fed's policy aim is to achieve a “soft landing” - a mild slowdown in growth that would cool down inflationary pressures but not spiral into a recession.
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2 comments:
This is good news indeed. The recently soft housing market in the U.S. appears to be behind us, so the U.S. economy will likely do well in 2007 and 2008 on the back of an upward tick in housing.
I share your optimism. It's indeed very important that the U.S. economy comes out of the slowdown without going into recession, not only for the U.S., but also for the rest of the world as a prolonged slowdown will affect other economies as well.
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