Bernanke concedes that the economic growth is going to be very slow indeed
February 28, 2008
On the 27th of February when the Federal Reserve chairman Ben Bernanke appeared before the House Financial Service Committee on Capitol Hill for the first day of testimony, he admitted that the growth rate of the nation in the current year is going to be very slow indeed. He also raised his concern about the overwhelming chances of the nation going into inflation.
The entire pool of investors and financial experts had their eyes on the Fed head on Wednesday as he embarked upon the mission of trying to summarize the huge amount of challenges the Federal Reserve was facing at the moment. Some of the main problems it is facing at the moment, according to him are that, the economy is currently at a very high risk of falling into a recession; the financial markets are totally unstable and volatile and the ever rising possibilities of inflation.
Bernanke as he faced the House Financial Service Committee admitted that the economy is facing a ‘difficult situation’. His remarks were made on the first day of the semi-annual trial regarding the Federal Reserve’s monetary policies till now. He told the House Financial Service Committee that the main challenge the Fed was facing was to make sure that a balance was attained between the risks involved and the activities that Fed was undertaking. He also said that determining at a particular point of time which risk is more serious is also very important for the journey ahead.
The testimony he made to the lawmakers however made one thing very clear: the economy was the still the prime concern of the central bank. His prepared testimony gave enough evidence to imply that the downside risk to growth that was there earlier is still there at large. All the comments and remarks Bernanke made was in sequence with the Federal Reserve’s recent stance. It was also a follow-up of the comments he had made almost two weeks earlier along with the Treasury Secretary Henry Paulson in front of a Senate panel. At that time both of them had said that the U.S. economy was not going to do to well this year but that it would be able to avoid the recession that has been forecasted as a result of a $170 billion plan that had been approved by President Bush on the 13th of February. The interest rate cuts the Fed have been implementing is also another factor according to him that will help the country in avoiding a recession.
As his testimony was released, the markets at the outset turned higher. This is because the investors found enough from his words that the Federal Reserve was prepared go forward with its interest rate cuts to boost the economy even further.
Speaking about Bernanke’s testimony on the 27th many of the e
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