LONDON, May 27, 2008 (AFP) – A recession in the United States remains a probability, former Federal Reserve chairman Alan Greenspan said in an interview published Tuesday. Speaking to the Financial Times from Washington, Greenspan said he believed “there is a greater than 50 percent probability of recession.”
He noted, however, that “that probability has receded a little”.
The likelihood of a severe recession had “come down markedly”, he added: but it was too soon to tell whether the worst was already over.
According to the Financial Times, Greenspan estimated that house prices in the United States would drop by a further 10 percent from their levels in February, which comes to a 25 percent drop from their peak.
“Such house price declines imply a major contraction in the level of equity in owner-occupied homes, the ultimate collateral for mortgage-backed securities,” he said.
US economic growth has slowed dramatically in recent months and a growing number of economists believe the world’s largest economy will experience a recession during 2008 amid a housing slump and related credit crunch.