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Spokane, Washington  Est. May 19, 1883

Imf Sees Strong Global Economy Lending Institution Predicts Continued Growth, Low Inflation

Harry Dunphy Associated Press

The International Monetary Fund gave the world’s economy an upbeat assessment Wednesday, predicting growth would continue and inflation would remain at its lowest level in 30 years.

The 180-nation lending institution praised U.S. economic performance in its semiannual report but said prices on Wall Street might be on the high side. It also said the Federal Reserve might have to increase interest rates before the end of the year, as it did March 25 for the first time in two years.

In its World Economic Outlook, the IMF cautioned that high unemployment and weak growth rates in Europe complicated chances of establishing a single European currency by 1999. It said this was creating turbulence in European markets.

The report did not address behind-the-scenes discussions between U.S. and Japanese authorities over the dollar’s recent strengthening against the Japanese yen. But current exchange rates appear to reflect current economic conditions, given inflationary pressures in the United States and slow growth in Japan, the report said.

“Looking forward to 1997 and 1998 we see world output growing at slightly above 4 percent,” IMF Chief Economist Michael Mussa said at a news conference. “Inflation is expected to remain at 2.5 percent, the lowest rate we have had in three decades.”

He said that while there was concern about inflation in some countries, “We don’t see any significant risk at this time or any major uptick either worldwide or in individual countries.”

Mussa said the U.S. stock market “does seem to be a little on the rich side.” But he said American companies’ earnings usually are strong, which could mean that “a risk of cumulative downturn is probably not all that great.”

The report said that while “globalization” - the integration of trade, finance and information that is creating a single global market - had caused some problems such as job losses and declining pay, it was contributing to world prosperity.