The global economic outlook is positive despite a slowdown in the US housing market, according to the Bank of Ireland (B of I).
Citing a forecast by the International Monetary Fund (IMF) that the world economy would expand by 4.8 per cent in 2008, B of I chief economist Dr Dan McLaughlin said two more rate cuts were expected by the US Fed in the next six weeks..
Commenting on the publication of the October Bank of Ireland Global Markets Research Bulletin, Dr McLaughlin said these forecasts include downward revisions to previously published forecasts for the developed economies, including the United States and the euro area.
However, the US Fed is expected to introduce further rate cuts this year as the housing market continues to influence the US economy into 2008, according to Dr McLaughlin.
"Accordingly, we expect two further rate cuts by the Fed in the next six weeks - specifically a quarter point reduction on October 31, with a similar move at the December 11 meeting," he said.
Dr McLaughlin said the adverse affect of the sub-prime issue on the housing market could linger longer than the Fed's predictions. This could impact on the broader economy by influencing consumer spending and discouraging financial institutions from lending. "
Against this backdrop, it is expected that the Fed will continue to ease its monetary policy in order to reduce the risk of the housing recession leading to a recession in the US economy."