FED Chairman Ben Bernake says Recession is Possible
Written by admin on Thursday, April 3rd, 2008 in US economy, World Economies.
To FED boss Ben Bernanke added to the concerns of already strained financial markets by warning that contraction of gross domestic product (GDP) in the first six months of 2006 is a distinct possibility.
Speaking to congress Bernake said “It now appears likely that real GDP will not grow much, if at all, over the first half of 2008 and could even contract slightly”
With two consecutive three month periods of negative growth generally accepted as the definition of recession the US could be heading towards that mark.
The announcement came as Mr Bernake begins two days of testimony to US congress, at which it is thought he will be questioned on the FED’s decision to rescue Wall Street investment bank Bear Sterns.
“We did what we did because we felt it was necessary to preserve the integrity and viability of the American financial system, which in turn is critical for the health of the economy,” Ben Bernake
Mr Bernake has also said that it will take up to two years to determine whether or not the economy technically hits recession status, based on an the judgement by the non-profit economic research institute, the National Bureau of Economic Research (NBER).
He went on to predict that after a tricky first half in 2008 the economy would see an upturn in the second half of the year, which will continue throughout 2009.
It is thought that the expected up turn will be helped by the cuts the FED has made in interest rates and the government’s $168bn (£85bn) stimulus package that involved tax rebates to individuals and tax breaks to businesses.
The FED has cut interest rate has by more than half since 2007 which now stands at 2.25%. The next review is due to start on April 29th.