Greenspan sees recession risk lessening

Greenspan sees recession risk lessening

14 June, 2008

AFP

MEXICO CITY - FORMER Federal Reserve chairman Alan Greenspan told the Latin American Economic Forum here that he sees a reduced possibility of a deep recession in the United States.

'I think the worst is over,' Mr Greenspan said of United States economic woes, speaking via video-conference from Washington on Friday.

There is now a 'reduced possibility' of a deep recession, the former Fed oracle said, after telling the Financial Times late last month that a US recession remained a probability.

Mr Greenspan told the paper he believed 'there is a greater than 50 per cent probability of recession', noting, however, that 'that probability has receded a little'. He also told the paper that the likelihood of a severe recession had 'come down markedly' but added it was too soon to tell whether the worst was already over.

The US economy grew at an annual 0.9 per cent pace in the first quarter of the year, the government said in late May, in an upward revision that calmed the nerves of some economists.

The Commerce Department initially pegged first-quarter gross domestic product (GDP) growth at 0.6 per cent, the same lacklustre pace as the 2007 fourth quarter.

The revision, in line with expectations, bolsters the stance of some economists who believe the world's largest economy will avoid a recession despite a deep housing slump, a related credit crunch and soaring oil prices.

A recession, which last hit the US in 2001, is typically defined as two straight periods of negative economic activity. The Federal Reserve has been trying to avert an economic slump by aggressively slashing interest rates. -- AFP