Economists at investment bank Schroder Salomon Smith Barney have painted a relatively benign picture of the global economy.

But they believe the US economy will slow dramatically over the next two quarters.

Economists Mr Michael Saunders and Mr Robert Khan told an investment conference in Dublin yesterday that the prospects for global economies "are not that bad".

Low inflation in most major economies meant central banks could cut interest rates to enhance economic growth.

Mr Saunders described the expected US slowdown as a "soft recession".

He said aggressive interest rate cuts by the Federal Reserve should lead to a rebound in the second half of this year. He added that US growth was likely to return to around 3.5-4 per cent next year.

He said the Republic would feel some of the heat from the US slump because of the economy's exposure to the high-technology sector. But he added that the Republic's position would be helped by the fact that the State still had one of the lowest labour costs in the EU, low corporate tax rates and a high level of deregulation.

He ruled out any prospect of the Irish economy going from boom to bust. "There will be nothing like that because interest rates will not go up sharply," he said.

Mr Saunders said the Fed would probably cut rates by a half percentage point this week and that another half-point cut in March was a strong possibility.

The analyst added that the euro was likely to reach parity against the dollar within the next three months.

The Salomon analysts believe both the Bank of Japan and the European Central Bank will begin easing rates soon. They believe the ECB's rate cuts will be somewhat lower than markets are discounting.

"Market expectations of more aggressive ECB easing could materialise if the euro surge proved sharper and more sustainable than we anticipate, or if the slowdown abroad proves more acute or persists beyond mid-year," they added.