Economy - Monday

Paulson: Credit crunch lingering

Treasury Sec'y Henry Paulson urged global institutions to devise policies to help prevent another credit crunch. "We need to continue to be vigilant, because all of our capital markets are not yet functioning normally," he said, echoing comments by other officials. But he added that the global economy remains strong despite tight credit.

Developing economies such as China and India account for an increasing share of global economic growth and should have more influence in multilateral financial bodies, Paulson said. Fed Gov. Randall Kroszner said policymakers will act to ensure that capital markets function smoothly while fostering sustainable economic growth and price stability. The UBS-Gallup index of U.S. investor confidence rose 2 points to 70 in Oct. on sentiment that the Fed's interest rate cut will bolster the economy. But investors' views of their own portfolios slumped on worries about the housing slump and the falling dollar. IMF: Credit woes could spread

The credit crunch arising from the U.S. subprime mortgage crisis could hit world economic growth, International Monetary Fund chief Rodrigo Rato said. "The question is now whether the global economy is at an inflection point," Rato said. "So far, it seems that growth will continue, although at a slower pace than in the past two years."

Credit turmoil likely will have a limited impact on growth in the 13-member euro zone, European Central Bank policymakers said, though they gave conflicting views about the outlook for inflation. Japan's economy seen on track

Japan remains on a sustained growth path with stable prices, Bank of Japan Gov. Toshihiko Fukui said. But he said "substantial uncertainty" remains over what impact the global credit crunch will have on Japan's economy. Many analysts expect the BoJ to raise interest rates in Dec. or early next year from the current 0.50%, the lowest in the industrialized world.

COMING UP WEDNESDAY

Existing-home sales for Sept., 10 a.m. EDT (forecast: 5.25 mil annual rate).