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Central Bank Chiefs Optimistic About World Economy

The central bank chiefs of Japan, Europe, and the United States Wednesday expressed optimism about short-term economic prospects in their economies. As VOA's Barry Wood reports, the central bankers spoke via video link with their counterparts attending a monetary conference in South Africa.

Toshihiko Fukui of Japan said the Japanese economy is on track to grow by two percent this year. Still battling the effects of a decade of deflation, Fukui in February doubled short-term interest rates to five tenths of one percent.

Jean-Claude Trichet, the head of the European Central Bank, was also optimistic about the eurozone - the 13 countries that use the euro currency. The ECB is forecasting economic growth of 2.6 percent this year, just under the 2.7 percent growth of 2006.

Ben Bernanke, the head of the U.S. central bank, told the conference the American economy is on track for growth of about two percent even though in the first quarter, economic growth slowed to six tenths of one percent, the slowest advance in over four years.

Bernanke said the weakness in the housing sector has reduced economic growth in the United States by about one percent.

"As you know, the downturn in the housing market has been sharp," said Ben Bernanke. "From their peaks in mid-2005, sales of existing homes have declined more than 10 percent, and sales of new homes have fallen by 30 percent."

Bernanke said the recovery in housing has not been as fast as earlier predicted.

"House prices decelerated sharply last year, following annual gains averaging nine percent from 2000 to 2005," he said. "Prices have continued to be quite soft so far in 2007."

With U.S. and other stock markets at record highs, investors seem to be discounting the possibility that weakness in housing will tip the US economy into recession.

Investors stress that strength in Asia and Europe have brought needed balance to the world economy, making global growth less reliant on the U.S. economy.

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