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| Version 2 | Version 3 |
|---|---|
| Fed boss warns of weaker economy | Fed boss warns of weaker economy |
| (about 9 hours later) | |
| Federal Reserve chairman Ben Bernanke has warned that the outlook for the US economy is deteriorating. | Federal Reserve chairman Ben Bernanke has warned that the outlook for the US economy is deteriorating. |
| He said the housing and credit market turmoil had hit the economy and added that a weak labour market could further undermine consumer spending. | He said the housing and credit market turmoil had hit the economy and added that a weak labour market could further undermine consumer spending. |
| Given the risks facing the economy, Mr Bernanke signalled that additional US interest rate cuts were likely. | Given the risks facing the economy, Mr Bernanke signalled that additional US interest rate cuts were likely. |
| The central bank began lowering the cost of borrowing in September and cut rates dramatically in January. | The central bank began lowering the cost of borrowing in September and cut rates dramatically in January. |
| 'Timely action' | 'Timely action' |
| Mr Bernanke did not mention the risk of a recession and said he expected the economy to pick up later this year after a period of "sluggish growth". | |
| I believe our economy will continue to grow, although its pace in coming quarters will be slower than what we have seen in recent years Henry PaulsonUS Treasury Secretary | |
| "The outlook for the economy has worsened in recent months, and the downside risks to growth have increased," Mr Bernanke told the Senate Banking Committee. | "The outlook for the economy has worsened in recent months, and the downside risks to growth have increased," Mr Bernanke told the Senate Banking Committee. |
| "To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so." | "To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so." |
| He said the Federal Reserve "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks". | He said the Federal Reserve "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks". |
| The Fed has cut interest rates substantially since September last year to bring its key rate to 3% from 5.25%. | The Fed has cut interest rates substantially since September last year to bring its key rate to 3% from 5.25%. |
| This included an unscheduled emergency rate cut on 23 January of three quarters of a percentage point - its biggest in 25 years. | |
| Mr Bernanke's pessimistic assessment of the US economy knocked share prices, with the benchmark Dow Jones index closing down 1.4%. | |
| Rescue plan | Rescue plan |
| US Treasury Secretary Henry Paulson, also testifying, said he was hopeful that the economy would be able to avoid falling into a recession this year. | |
| "I believe our economy will continue to grow, although its pace in coming quarters will be slower than what we have seen in recent years," Mr Paulson said. | "I believe our economy will continue to grow, although its pace in coming quarters will be slower than what we have seen in recent years," Mr Paulson said. |
| He said the two-year $167bn (£86bn) economic stimulus plan signed into law by President George W Bush on Wednesday should help the faltering jobs market by creating more than half a million jobs by the end of this year. | He said the two-year $167bn (£86bn) economic stimulus plan signed into law by President George W Bush on Wednesday should help the faltering jobs market by creating more than half a million jobs by the end of this year. |
| The plan includes giving tax rebates to 130 million US households. | The plan includes giving tax rebates to 130 million US households. |
| Mr Paulson also said the government was working on plans to help homeowners who are facing problems making mortgage repayments avoid defaulting on their loans. | Mr Paulson also said the government was working on plans to help homeowners who are facing problems making mortgage repayments avoid defaulting on their loans. |
| Democratic leaders of the US Senate have proposed a housing market rescue plan that would let some bankrupt homeowners erase a portion of their mortgage debt. | |
| The bursting of the US home price bubble has triggered a rise in mortgage defaults and repossessions, a crisis in US housing finance, losses at major banks and a credit crunch worldwide. | |
| 'Warning bell' | |
| Mr Bernanke said that he would be monitoring housing, labour and credit markets in coming months. | |
| He said he it was difficult to get a clear idea of bank losses from sub-prime activities, but he did not expect such losses to render any banks insolvent. | |
| "A significant worsening in financial conditions or in credit availability would certainly be a warning bell that we need to take further actions," Mr Bernanke said. | |
| The problems in the world's credit markets were set off by record default rates in the US sub-prime mortgage sector that lends to those with poor credit ratings. | |
| Many of those loans had been lumped together, repackaged and sold on to banks as an investment with high returns. |