Fed Chairman Downbeat About US Economy

09 November 2007

WASHINGTON, DC: Finally lured from his burrow to comment on the state of the US economy, Federal Reserve chairman Ben Bernanke (pictured) was in downbeat mode in his address to Congress on Thursday.

The US economy - and that effcetively means most of the western democracies - will "slow noticeably" into 2008 due to anemic credit markets, soaring oil prices and a continued housing slump, he opined.

Bernanke told the Joint Economic Committee of Congress: "Our assessment is for slower growth, but positive growth going into next year.

"We think that by the spring, early next year, that as these credit problems resolve and as, we hope, the housing market begins to find a bottom … the economy [will] recover to a more reasonable growth pace."

He also warned that the Fed's forecast of economic growth recovery in 2008 could be at risk if financial markets fail to tranquilize as anticipated or the housing crisis worsens.

In response to a pointed question from committee chairman Senator Charles Schumer (Democrat, New York), who asked whether the risks of a downturn were rising, Bernanke said the Fed had "not calculated the probability of a recession."

That answer can be interpreted in either of two ways: that the Fed has discounted such a possibility; or that it has been dangerously neglectful.

Astonishingly, the politicos failed to follow-through on that answer. Fortunately for Bernanke.

Data sourced from USA Today; additional content by WARC staff