Paulson Says Global Growth Solid and Inflation Low

U.S. Treasury Secretary Henry Paulson said global economic growth is solid, seeking to restore investor confidence after a stock-market slump that erased $3.3 trillion in global market value.

``We have solid growth, low inflation and high levels of liquidity,'' Paulson said to reporters after meeting South Korea's Finance Minister Kwon Okyu in Seoul today. ``Markets seldom move forever in a straight line.''

The Morgan Stanley Capital International World Index has risen 1.4 percent in the past two days. The global equity gauge slumped 6.1 percent in the previous five sessions after the biggest plunge in Chinese equities in a decade and disappointing reports on the U.S. economy rattled investor confidence.

``Policy makers have been trying to reassure investors, and a qualification for the job as treasury secretary is to sound upbeat on the economy,'' Shane Oliver, Sydney-based chief economist at AMP Capital Investors, which has about $64 billion under management. ``I wouldn't totally dismiss the market concerns out of hand. The global economy is slowing down and there is uncertainty about just how much it will weaken.''

Paulson is on a four-day trip to Japan, South Korea and China, Asia's three largest economies. In a separate statement, South Korea's finance ministry said Paulson told Kwon the U.S. economy has entered a stable growth path even after the housing market slide.

U.S. stocks broke a weeklong slump and posted their biggest gains since July after Paulson said yesterday an increase in bad debts at subprime mortgage companies won't affect banks that make less risky loans. The Standard & Poor's 500 Index added 1.6 percent, the best performance since July 24.

`Recent Volatility'

Kwon and Paulson today agreed the outlook for the global economy is solid and will continue to grow ``despite the recent volatility in the international stocks and currency markets,'' according to the South Korean finance ministry's statement.

Australian central bank Assistant Governor Malcolm Edey also said the world economy is likely to keep expanding. ``The prospects for global growth in the short term seem to be good,'' he told a conference in Sydney today.

The Morgan Stanley Capital International Asia-Pacific Index advanced 0.3 percent to 141.16 at 2:33 p.m. in Tokyo. The gauge yesterday climbed 1.8 percent, its first gain since a selloff that began Feb. 27.

``I don't see global growth collapsing,'' AMP's Oliver said. ``But the fact that it is slowing down causes uncertainty and turbulence along the way.''

Paulson, former chief executive of Goldman Sachs Group Inc., travels to Beijing later today, before a speech in Shanghai tomorrow, which he plans to use to press China to speed its move to unfettered capital markets.