http://observer.guardian.co.uk/business/story/0,,1838081,00.html?gusrc=rss&feed=12
Fed admits US recession on cards
Heather Stewart, economics correspondent
Sunday August 6, 2006
The Observer
The United States faces almost a 40 per cent chance of slipping into
recession in the next 12 months, according to the Federal Reserve's
own market model.
As Fed chairman Ben Bernanke prepares to decide whether to raise
American interest rates for the 18th time on Tuesday, bond prices and
the high level of borrowing costs are now showing a 38 per cent chance
of recession, according to a model published by Fed economist Jonathan
Wright earlier this year.
After official payroll figures released on Friday showed that the
economy created fewer jobs than expected last month, Wall Street began
predicting Bernanke would halt the Fed's rate-hiking campaign this
week. But some economists believe the central bank has already gone
too far.
'They've hiked far too much,' said Ian Shepherdson of High Frequency
Economics.
'The Fed has a long and inglorious history of raising rates too far,
and cutting them too far.'
He expects growth in the world's largest economy to have ground to a
halt by the end of the year, even if Bernanke chooses to leave rates
unchanged this week.
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Not good news
Harry
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