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US FED: Bernanke Sees Some Possibility Of Recession End in 2009
Federal Reserve Chairman Ben Bernanke said in testimony today before the Senate Banking Committee that there is a 'reasonable prospect' that the current recession will end in 2009 and that the economy will recover in 2010 but only if actions taken by the Obama administration, Congress and Federal Reserve are successful in restoring 'some' financial stability.Bernanke warned, however, that the Federal Open Market Committee's dire January economic forecast (2009 GDP at a central tendency between -0.5% and -1.25%) 'is subject to considerable uncertainty, and I believe that, overall, the downside risks probably outweigh those on the upside.' One risk he points to is the global nature of the slowdown, which he said could worsen U.S. exports and financial conditions beyond what is already expected. Another is the so-called adverse feedback loop, in which weakening economic and financial conditions become mutually reinforcing. 'To break the adverse feedback loop, it is essential that we continue to complement fiscal stimulus with strong government action to stabilize financial institutions and financial markets,' Bernanke said. As for the Fed's role going forward, Bernanke said little more than that it would use 'all available tools to stimulate economic activity and to improve financial market functioning.' He repeated the FOMC's stance in keeping the federal funds rate at exceptionally low levels 'for some time' and noted that the Fed will soon begin to extend loans through the recently announced Term Asset Backed Securities Loan Facility (TALF). 'If financial conditions improve, the economy will be increasingly supported by fiscal and monetary stimulus, the salutary effects of the steep decline in energy prices since last summer, and the better alignment of business inventories and final sales, as well as the increased availability of credit,' Bernanke said in his annual Humphrey Hawkins testimony. Posted by: tipper 2009-02-24 |
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