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US Fed must act now to avoid a recession, says ABN AMRO

ABN AMRO Bank’s chief economist Joost van Leenders claims there’s no longer any question of whether the US Federal Reserve will cut rates, but rather by how much.

Van Leenders says the risk of a recession has increased significantly. He estimates that risk to be 40 per cent at present and says it will be considerably higher if the Fed does not to act promptly.

Van Leenders believes the Fed will cut rates from the current level of 5.25 per cent to 4 per cent by year-end and then leave rates unchanged for some time.

He says: “There is a lot of talk about moral hazard, with many suggesting that the Fed should not rescue those who have taken irresponsible risks in financial markets. We have little sympathy for this argument. The balance of risks is uneven for the Fed. By not easing or not easing aggressively enough, it risks a significant downturn in which many people may lose their jobs and homes. If it eases too aggressively, it may encourage moral hazard.

“We would therefore suggest that the Fed deals with excessive leverage when the more immediate economic problems have been overcome in the course of 2008.”


Aifa says RDR comes down to core issue of independence

Aifa says there is a lack of logic behind the retail distribution review and reaffirmed its view that whole of market advice is an essential condition for independence.In the third of its RDR Issues Papers, Aifa says the RDR proposals could devalue the strong brand that consumers associate with the word independent.Deputy director general Fay […]

‘RDR breaches human rights’

Solicitors for Independent Financial Advice says the FSA’s proposal to create a professional tier of IFAs as part of its retail distribution review could potentially be a breach of human rights.Managing director Ian Muirhead says although he can understand the FSA’s wish to elevate the top tier of financial advisers to a similar technical status […]


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