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Bernanke sees US rebound ahead Bernanke sees US rebound ahead
(about 7 hours later)
Ben Bernanke, the head of the US central bank, the Federal Reserve, says that the US economy will rebound, even as housing sales continue to slump.Ben Bernanke, the head of the US central bank, the Federal Reserve, says that the US economy will rebound, even as housing sales continue to slump.
Mr Bernanke reiterated the Fed's view that the economy will expand "at a moderate pace" though the housing market is a "drag" on economic growth.Mr Bernanke reiterated the Fed's view that the economy will expand "at a moderate pace" though the housing market is a "drag" on economic growth.
The upbeat view echoes May data showing consumers were unexpectedly optimistic.The upbeat view echoes May data showing consumers were unexpectedly optimistic.
The comments fuel the view that the Fed is not planning to cut interest rates.The comments fuel the view that the Fed is not planning to cut interest rates.
Limited impactLimited impact
The housing slump in the US has been a serious concern, creating fears that it could have a knock-on effect on other sectors of the economy, say analysts.The housing slump in the US has been a serious concern, creating fears that it could have a knock-on effect on other sectors of the economy, say analysts.
But Mr Bernanke, who was speaking via satellite to an international monetary conference in Cape Town, South Africa, said the impact of the slump appeared limited.But Mr Bernanke, who was speaking via satellite to an international monetary conference in Cape Town, South Africa, said the impact of the slump appeared limited.
"We have not seen major spillovers from housing onto other sectors of the economy," said Mr Bernanke."We have not seen major spillovers from housing onto other sectors of the economy," said Mr Bernanke.
Construction of new homes looks set to remain "subdued for a time" and the glut of properties in the market will remain, he added.Construction of new homes looks set to remain "subdued for a time" and the glut of properties in the market will remain, he added.
'Inflation somewhat elevated'
There has been particular concern over the impact of the sub-prime market - which provides loans to high risk individuals - as the number of default loans has risen.There has been particular concern over the impact of the sub-prime market - which provides loans to high risk individuals - as the number of default loans has risen.
Mr Bernanke said the Fed would look at further ways to regulate the sub-prime market, following response to calls from Congress to toughen regulation of the sub-prime market.Mr Bernanke said the Fed would look at further ways to regulate the sub-prime market, following response to calls from Congress to toughen regulation of the sub-prime market.
On another note, Mr Bernanke said the level of inflation remained "somewhat elevated".On another note, Mr Bernanke said the level of inflation remained "somewhat elevated".
US stocks slid in early trade following Mr Bernanke remarks, a day after the Dow Jones industrial average reached a new record.US stocks slid in early trade following Mr Bernanke remarks, a day after the Dow Jones industrial average reached a new record.
The Fed next meets to consider interest rates on 27-28 June, and most analysts expect rates to remain at 5.25%, where they have been for more than a year.The Fed next meets to consider interest rates on 27-28 June, and most analysts expect rates to remain at 5.25%, where they have been for more than a year.