This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.
You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/7245312.stm
The article has changed 5 times. There is an RSS feed of changes available.
Version 3 | Version 4 |
---|---|
Fed boss warns of weaker economy | Fed boss warns of weaker economy |
(about 23 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". | 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 | 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. | 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%. | 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. | 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. |
Yet speaking separately, former Fed boss Alan Greenspan warned that the US economy is "clearly on the edge". | |
He told an energy conference that the economy will continue to struggle until the housing market recovered. | |
Mr Paulson 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. | 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. | 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' | 'Warning bell' |
Mr Bernanke said that he would be monitoring housing, labour and credit markets in coming months. | 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. | 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. | "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. | 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. | Many of those loans had been lumped together, repackaged and sold on to banks as an investment with high returns. |