Tuesday, September 18, 2007

Looming threats

Earlier in the year, Greenspan warn the world that there is one out of three chance that the US economy will set into a recession. But now he has raises the probability to somewhat less than 50 percent.
The biggest risk of the US economy still lies at subprime problems. If the whole problem worsen or intensify, it would have a spillover effect on the global economy and Singapore too will not be spared.
Singapore on Monday 17 september reported its key exports rose an annual 11 percent in August, boosted by increased shipments of pharmaceuticals. Despite all the problems in the US, macro-economic fundamentals remain fairly good in Singapore and Asia. However, Singapore economy is still really dependent on the US.
Come 18 september, the fed will decide on benchmark federal funds interest rates. The Fed is widely expected to lower benchmark interest rates, now at 5.25 percent, by at least a quarter-percentage point to help the economy weather a housing downturn and a credit crunch. But bear in mind, lowering of interest rate will cause inflation. We just do not know which is of the lesser evil. Hopefully, the fed will make the right decision. We shall wait and see.

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