Even before last week’s reports of a rise in retail sales and industrial production, Federal Reserve Board chairman Ben Bernanke announced that the recession is “very likely over … at this point … we are in a recovery”. Not everyone agrees. Tim Drayson, an economist at Legal & General, fears that “the US and UK economies may suffer a relapse in growth”. Capital Economics thinks growth will “begin to fizzle out” by the middle of next year.
But the optimists are in the majority. Goldman Sachs says the recession ended in June, and Bank of America Merrill Lynch is expecting the economy to grow at a rate of 3% this quarter and 3.3% in the coming six quarters. (Remember:we economists use decimal places to prove we have a sense of humour.) Even the pessimists concede that the international financial system is back from the brink, that talk of another Great Depression was premature and, at least in the near future, growth will return, probably at a 3% annual rate. All of which has central bankers around the world mulling over exit strategies — ways to begin to withdraw cash and support from the economy. And President Barack Obama and his Treasury secretary, Tim Geithner, figuring out what policy modifications a nascent recovery requires.
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