--IMF's Fischer: Fed rate cuts main reason why US turnaround soon
--IMF's Fischer says 2001 global growth to be lower at 3.5%
--IMF's Fischer:ECB can cut rates if activity slows, euro rises
--IMF's Fischer: Fed has shown will cut US rates again if needed
--IMF's Fischer: Japan has little room to move on macro policy
--IMF's Fischer: US real interest rates not unusually low now
--IMF's Fischer: Says further Fed cut wouldn't create problems
--IMF's Fischer: Indonesia reforms slow, but not backing off
--IMF's Fischer: Euro zone structural jobless rate too high
--IMF's Fischer says Japan crucial to world, Asia econ growth
By Regina Schleiger and Liz Alderman, BridgeNews
Davos--Jan. 27--International Monetary Fund first deputy managing director Stanley Fischer said Saturday he expects the U.S. economic slowdown to be temporary, mainly because of the Federal Reserve's aggressive monetary policy easings. He said the U.S. economy is "in for a temporary period of low growth" with a base line growth assumption above zero percent followed by "a pickup later in the year giving annual growth of around 2.5%." However, there was a risk that growth will be lower, he said.
* * * Fischer said the IMF is now expecting global growth in 2001 to come in around 3.5%, compared to a forecast of below 4% offered by IMF chief economist Michael Mussa recently.
Fischer said the Fed's surprise inter-meeting 50-basis-point rate cut on Jan. 3 was extremely welcome and "one of the main reasons for a turnaround that will come very soon."
Fischer said cuts in U.S. interest rates have "actually buoyed confidence in the economies in the rest of the world, so that as you move south the interest rate effect becomes more and more important." He said real interest rates are not unusually low right now and that another cut in the Federal funds rate--largely expected at the Federal Open Market Committee meeting Jan. 30-31--would not create problems for the world economy.
"U.S. real interest rates are not unusually low at present by historical standards so I don't fear" a further cut, Fischer said. He added the Fed has room to cut a further 400-500 basis points if needed although he did not expect it will.
Fischer said the euro-zone indicators are mixed for growth. Fundamentally, the situation looks "pretty strong," although "there will be some impact of weaker demand from the U.S. and a strengthening in the euro."
"There is room for interest (European) rate cuts if activity weakens or if the euro appreciates," Fischer said.
He continues to be concerned about "extremely high" structural unemployment rates in Europe at around 8%, and he said he sees no reason the region cannot grow at rates of 3% while pursing structural reforms. His view of Japan was starkly less optimistic, but Fischer said the country's economic recovery is very important "for the world and Asia." "We're not sure yet but it's even possible it (the Japanese economy) may have declined sharply in the fourth quarter," Fischer said.
He said there has "not a lot of room for maneuver in Japan with regard to macroeconomics." "Monetary policy has a little room to move back to zero."
Another struggling Asia economy Fischer voiced concern about was Indonesia, t where he said "progress is slow...but I don't see a backing off." End [End BridgeLinks]
Regina Schleiger, BridgeNews, Tel: ++41-78-635 1505