Magazine article American Banker

1st Boston Sees Upturn in Europe; Japanese Slide Expected to Go On

Magazine article American Banker

1st Boston Sees Upturn in Europe; Japanese Slide Expected to Go On

Article excerpt

SINGAPORE -- While U.S. monetary authorities are trying to decelerate the pace of their economy, the Japanese economy has yet to hit rock bottom and the yen is likely to weaken, senior economists of CS First Boston Ltd. said last week.

But they see a European recovery under way, induced by declining inflation and cuts in fiscal deficits.

Neal Soss, managing director and chief economist of CS First Boston in New York, said the Federal Reserve is concerned that the maturing U.S. business expansion is rapidly using up the economy's margin of spare resources, leading to possible inflationary flare-ups.

Speaking at a conference on the global economic outlook, Mr. Soss said the Fed was tilting away from "an expansionary or accommodative monetary stance" to relieve inflationary risks:

He said there was a broad consensus that potential U.S. gross domestic product growth without stirring inflationary pressures was about a real 2.5% per year.

The Fed with the acquiescence of President Bill Clinton's administration, was pursuing a policy of decelerating the growth rate by raising interest rates, he said.

CS First Boston expects the federal funds rate to rise by another 125 basis points, to about 5.5%, over the next nine to 12 months, before U.S. monetary policy officials would be persuaded that the economy had decelerated to the desired 2.5% growth path, Soss said.

Higher interest rates are likely to lead to more foreign exchange market interventions by central hanks and the strengthening of the dollar. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.