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Fears over a looming US recession triggered a sharp drop in global markets this week, but many economists think those fears are overblown.
The sell-off reflected worries that the US Federal Reserve has been too slow to cut interest rates from their current 23-year high, amid signs that the world’s largest economy is faltering. But most economists think markets were overreacting, with the US still on course for a so-called soft landing, where inflation falls back to the Fed’s 2 per cent goal without a sharp rise in unemployment.
Friday’s jobs report showed the fourth consecutive monthly rise in the unemployment rate to 4.3 per cent. Yet Fed officials have said this figure remains low by historical standards, suggesting the central bank is less alarmed by the state of the labour market than investors.
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