US to recover year-end?

CHICAGO - A top Federal Reserve official held out hope that the US economy may start to recover late this year from the crippling recession that is wiping out jobs.

Jeffrey Lacker's forecast that the world's biggest economy will show 'positive growth by the end of the year' stands in stark contrast with dire predictions for the world economy of most international organisations and private economists.

International Monetary Fund First Deputy Managing Deputy Director John Lipsky said in an interview published on Friday the downturn in the world's top economies could last into next year, justifying unprecedented policy action to contain the crisis.

The European Central Bank and the Bank of England slashed interest rates to record lows on Thursday to battle deepening recessions.

The BoE also pledged 75 billion pounds ($106 billion) of newly created money to buy government bonds and pump funds into the struggling economy, embarking on an scheme known as quantitative easing, unprecedented in Britain, but tried by Japan with limited success at the beginning of the decade.

'The emerging consensus is that it looks as if the downturn in the advanced economies will run through this year and into next year,' Mr Lipsky told the Daily Mail newspaper.

'Our calculations suggest that the fall in GDP in the fourth quarter of last year and the first quarter of this year is the sharpest we can find in the post-war records,' he said.

'A forceful policy response is both warranted and justified,'

Mr Lacker, president of the Richmond Federal Reserve and a voting member of the Federal Open Market Committee, told CNBC television that the plunge in discretionary spending may have run its course and could 'give people some confidence that we've almost seen the worst of it.' -- THOMSON REUTERS