US economic outlook 'favourable', but warns on housing
Friday, 3 August 2007
WASHINGTON, Aug 2 (AFP): America's economic prospects are "favourable" and the world's largest economy is likely to experience a so-called soft landing as growth rebounds and inflation cools, the International Monetary Fund (IMF) said yesterday.
The IMF's annual snapshot on the US economy, however, warned that "spillovers" from the housing market downturn, which persisted for over a year, could present a risk to the economy.
"Spillovers from the housing market slowdown and the subprime mortgage market problems cannot be overlooked," the IMF report said.
Subprime mortgages are home loans that were granted to Americans with patchy credit records. Foreclosures tied to such loans have risen sharply in recent months.
"The most likely scenario is a soft landing, with growth recovering and inflation easing," the report said. "Prospects for the US economy are favourable."
US economic growth accelerated to a 3.4 per cent clip in the second quarter from a tepid 0.6 per cent rise in the first three months of the year.
The IMF also warned that tightening credit conditions in the financial markets could also hobble the economy.
Credit concerns have spiked in recent days, denting the performance of the US stock market, amid widening fears about the health of the US mortgage market and big lenders.
The report also noted that surging oil and commodity prices and a tight labour market could heighten inflation risks.
The Federal Reserve has kept its short-term fed funds interest rate pegged at 5.25 per cent for over a year, partly in a bid to ward off inflationary threats.
The IMF's annual snapshot on the US economy, however, warned that "spillovers" from the housing market downturn, which persisted for over a year, could present a risk to the economy.
"Spillovers from the housing market slowdown and the subprime mortgage market problems cannot be overlooked," the IMF report said.
Subprime mortgages are home loans that were granted to Americans with patchy credit records. Foreclosures tied to such loans have risen sharply in recent months.
"The most likely scenario is a soft landing, with growth recovering and inflation easing," the report said. "Prospects for the US economy are favourable."
US economic growth accelerated to a 3.4 per cent clip in the second quarter from a tepid 0.6 per cent rise in the first three months of the year.
The IMF also warned that tightening credit conditions in the financial markets could also hobble the economy.
Credit concerns have spiked in recent days, denting the performance of the US stock market, amid widening fears about the health of the US mortgage market and big lenders.
The report also noted that surging oil and commodity prices and a tight labour market could heighten inflation risks.
The Federal Reserve has kept its short-term fed funds interest rate pegged at 5.25 per cent for over a year, partly in a bid to ward off inflationary threats.