Deputy Federal Reserve chair Bill Dudley said the US economy has momentum to withstand weakness from abroad
Dudley waded into the debate on Friday, downplaying the likelihood of a rate cut: “To me, that’s not something that should be part of the conversation right now.”
The US economy has “quite a bit” of momentum that will help offset weakness from abroad, he said, even as he acknowledged he now expected inflation to take a bit longer to return to the Fed’s 2% target because of the drag from the falling price of oil.
The 19-member eurozone economy added another prop to market sentiment after figures showed it grew 0.3% in the final quarter of 2015 after German exports put in a strong performance.
But analysts continued to worry that the refugee crisis and the prospect of Greece defaulting on its loans, forcing it to seek further funds from Brussels and the International Monetary Fund, would halt the eurozone recovery.
France and Italy, which appeared to be recovering strongly last spring, showed that even the second and third largest economies in the currency zone were ailing.
France could only manage 0.2% growth in the final quarter while Italy registered 0.1% growth, despite benefiting from low energy costs, an export-boosting drop in the euro’s value and monetary stimulus from the central bank.
Jonathan Loynes, chief European economist at Capital Economics, said the downside risks had increased and as a result the European Central Bank will back “further decisive policy support” at its March meeting.
Greece, which has seen its debt to GDP ratio soar past 190% in recent months, fell into recession after recording its second quarter of negative growth.
The Syriza government, led by prime minister Alexis Tsipras, has struggled to maintain a recovery that followed an accord signed last summer for a third bailout.
Lenders are demanding that Greece scrap tax breaks for farmers and impose pension reforms that will lead to higher monthly contributions from the self-employed and salaried employees.
