Fri, Apr 4th - 2:49PM
Fears of U.S. recession growing
Bleak outlook for North American economy...
Financial market turbulence and fears of a U.S. recession are
expected to lead to a subdued performance by the world economy this
year, posing risks for euro zone growth, the Central Bank of Ireland
said on Friday.
"There is now a growing consensus that a
significant downturn in global activity is underway, with risks to the
outlook seen to be firmly to the downside," the bank said in its
"Following a number of years of strong
growth, the prospects are for a more subdued performance by the global
economy this year."
The bank said since late last summer, global
financial markets and central banks had been dealing with the fallout
from problems related to a "major correction in many financial asset
prices," which had helped trigger a global slowdown.
resulting increased uncertainty and international financial market
turbulence are proving to be more wide ranging and prolonged than was
hoped," it said.
The bank said the main risks related to the "still evolving" situation in global financial markets.
"Much will depend on how events play out in the U.S.," it said. "Recent
data suggest that the U.S. economy has weakened significantly since
late last year, with concerns heightening about the possibility of a
The bank said euro zone activity had slowed in the
final quarter of 2007 after recording strong growth in the first nine
It said while the "underlying fundamentals" of the euro
zone remained favourable, with employment growth and corporate balance
sheets remaining healthy, evidence in recent months suggested the pace
of growth had "remained below potential."
"As is the case
elsewhere in the global economy, uncertainty about the prospects for
euro area growth remain unusually high and risks surrounding the
outlook are on the downside," it said.
Despite the softening in
growth momentum, euro zone inflation had sharply risen in recent months
due the spike in oil and food prices.
The bank said headline euro zone inflation was expected to remain elevated in the months ahead before starting to decelerate.
It said the European Central Bank's Governing Council viewed
inflationary risks to the upside due to the potential for higher oil
and food prices and scope for wage rises.
"The Governing Council
has signalled its determination to ensure that such second-round
effects and upside risks to price stability do not materialise and that
medium and long-term inflation expectations remain firmly anchored in
line with price stability," it said.
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