Shakers: Soros sees U.S. at risk of recession in '07

Bloomberg News
JANUARY 10, 2006

The billionaire investor George Soros said Monday that the U.S. economy might fall into recession next year because of a cooling housing market. There is also a "reasonably significant chance of a global slowdown in 2007," he said. "Right now, the markets are as good as you could ask for."

Soros, chairman of the New York-based Soros Fund Management, said the biggest risk to the U.S. economy was that the Federal Reserve Board might raise interest rates too high, stifling the housing market. "That's why I expect the recession to occur in 2007," he said.

The potential for an end to a five-year boom in U.S. home prices has raised concern that the economy will slow, triggering a global slump. The number of mortgage applications filed in the last week of 2005 fell to the lowest level since 2002, according to the Mortgage Bankers Association.

The U.S. central bank last month raised the country's main interest rate for the 13th time. Soros said there was a risk that the central bank might raise rates more than needed to slow growth and curb inflation.

"Almost inevitably, they have got to overshoot because they can't stop until the economy shows signs of a slowdown," Soros said at an event organized by the Singapore Institute of International Affairs. "By the time it shows those signs, it may be a little too late"...