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Home >> Business
UPDATED: 10:28, July 03, 2007
Rebound in U.S. economic growth could fuel inflation: report
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Economic growth in the United States is likely to recover as the year progresses, but that could fuel inflation, according to the latest Wall Street Journal survey of forecasters.

Having run a veritable gantlet of threats to its health, the nation's economy is in a better place than it was just a few months ago.

Forecasters, however, also see a mounting risk: Thanks to longer-term shifts in the U.S. and global economic landscapes, even a little growth could lead to a resurgence of inflation, the Wall Street Journal reported Monday.

A resurgence of inflation would be painful for U.S. consumers and could cause the Federal Reserve (Fed) to ride the brakes by raising short-term interest.

With consumer spending holding up, a weaker dollar propelling U.S. exports and a pickup in production and investment, the 60 economists who took part in the survey expect the economy to grow at an annual rate of 2.6 percent in the second half of this year and 2.9 percent in 2008.

That is down from 3.3 percent in 2006, but much better than the 0.7 percent pace of the first quarter of 2007.

In the survey, conducted in mid-June, one in five forecasters saw a resurgence of inflation as the greatest risk facing the economy. That is more than twice the proportion who saw it as the No. 1 risk six months ago.

As a result, they now see little chance that the Fed will lower its target for short-term interest rates from the current 5.25 percent by December.

Source: Xinhua


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