UPDATE 2-Bernanke: US recession possible, growth to rebound
April 2nd, 2008 | by admin |(Adds recession comment, details from testimony, background,byline)
By Mark Felsenthal
WASHINGTON, April 2 (Reuters) - Federal Reserve ChairmanBen Bernanke said on Wednesday the U.S. economy could face amild recession but that growth should pick up as the impact ofaggressive interest rates cuts are felt.
“Recession is possible, but recession is a technical term… I’m not ready to say whether or not the U.S. economy willface such a situation,” Bernanke told the congressional JointEconomic Committee.
“It’s clearly a period of very slow growth extending backto the fourth quarter of last year, and we are trying to setour policies appropriately for that situation,” he said.
“Our estimates are that we are slightly growing at themoment, but we think that there’s a chance that for the firsthalf as a whole, there might be a slight contraction.”
Bernanke said the economic outlook was highly uncertain andthat risks to the Fed’s somber forecast were to the downside.He added that inflation also remained a concern, sayinguncertainty surrounded the outlook for prices as well.
The Fed has lowered its target for benchmark interest ratesby three percentage points to 2.25 percent since mid-September,and Bernanke did not close the door to more rate reductions.
However, he said rate cuts to date and emergency measuresto provide liquid funds to markets should promote growth overtime, remarks traders in financial markets saw as a signal thatthe Fed’s sharp rate-cutting action may be drawing to an end.
