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| Version 1 | Version 2 |
|---|---|
| Bernanke says 2008 outlook worse | Bernanke says 2008 outlook worse |
| (30 minutes later) | |
| Federal Reserve chief Ben Bernanke has said that the outlook for the US economy in 2008 has worsened. | Federal Reserve chief Ben Bernanke has said that the outlook for the US economy in 2008 has worsened. |
| His comments in Washington come after leading investment banks warned that the US was heading for a recession. | |
| However, Mr Bernanke said the central bank was willing to act in a decisive and timely manner to ensure the economy remained on an even keel. | However, Mr Bernanke said the central bank was willing to act in a decisive and timely manner to ensure the economy remained on an even keel. |
| The Fed has recently cut interest rates to counter slowing economic growth and problems in the housing market. | The Fed has recently cut interest rates to counter slowing economic growth and problems in the housing market. |
| Substantive action | |
| The bank has cut rates twice since the summer, most recently in December to 4.25% - its lowest in two years. | The bank has cut rates twice since the summer, most recently in December to 4.25% - its lowest in two years. |
| During his speech on Thursday, Mr Bernanke said the Fed was prepared to "take substantive additional action as needed to support growth and to provide adequate insurance against downside risks". | During his speech on Thursday, Mr Bernanke said the Fed was prepared to "take substantive additional action as needed to support growth and to provide adequate insurance against downside risks". |
| Some analysts say this is tantamount to saying the bank is prepared to cut interest rates again when it next meets at the end of this month. | Some analysts say this is tantamount to saying the bank is prepared to cut interest rates again when it next meets at the end of this month. |
| David Resler, chief economist at Nomura Securities International said Mr Breanne's remarks came as little surprise. | |
| "It is probably likely to solidify expectations around what is probably a consensus...that the Fed will [cut rates by] 50 basis points...Now more people will think that way." | |
| US stocks rose on the news as investors were buoyed by the prospect of future interest rate cuts. The Dow Jones Industrial Average added 89 points, or 0.7%, at 12, 824.3 in afternoon trade in New York reversing its earlier fall at the start of the day. | |
| The US is facing the twin threat of how to tackle a slowing housing market and lower consumer spending while at the same time addressing inflation as the rising oil price pushes energy prices up. | |
| Earlier this week, Merrill Lynch controversially said the US had already entered a recession, while Goldman Sachs has also suggested it is heading in that direction. |