US Economy Growth Rates Under Pressure
In a move which many believe the UK will follow in due course, the US Federal Reserve has cut forecasts for growth in the US economy from between 1.3% and 2% for 2008 to between 0.3% and 1.2%. While the one percentage point reduction may not seem a lot on paper it does mark a major step down from forecasts which were released in February of this year.
The forecasts for the future were released with the Fed minutes for their last meeting where base rates were cut from 2.25% to 2%. While the Fed has not dismissed further interest rate reductions out of hand there are concerns that, like the UK, inflation may well be the hidden monster to hit the short to medium term prospects for the US.
This seems to have pushed the Fed towards more of a defensive stance where they will look to maintain interest rates at current levels, but also reduce the temptation to make finance more freely available to refloat the economy.
Many analysts see a similar situation to the one which is materialising in the UK at this moment in time. Has the UK / US historical economic link been joined again or are both economies just sailing in the same direction?
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