Fed to act as needed to support growth
Written on February 15, 2008
Federal Reserve Chairman Ben Bernanke told Congress on Thursday the central bank will act as needed to help the struggling U.S. economy, but it has to be mindful that growth should pick up later in the year.
The Fed “will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,” Bernanke told the Senate Banking Committee.
He said the outlook for the economy had worsened in recent months and risks to growth had picked up.
However, the central bank chairman also said he expects sluggish growth to give way to a somewhat stronger expansion later this year and the likely effects of fiscal and monetary stimulus now put in place had to be considered in determining the appropriate level of interest rates.
“Our policy stance must be determined in light of the medium-term forecast for real activity and inflation, as well as the risks to that forecast,” he said.
Bernanke painted a somber picture of risks facing the economy and financial markets saw his comments as keeping the door open to more interest rate cuts from the Fed, which has already lowered benchmark borrowing costs by 2.25 percentage points since mid-September cash advance loan no fax. The federal funds rate now stands at 3 percent.
U.S. short-term interest rate futures prices pared losses to imply a 20 percent chance the central bank will drop rates by three-quarters of a percentage point in March, up from 6 percent earlier. A half-point cut is fully expected.
“Policy-makers are clearly ready to provide further monetary easing to support growth,” said Steve Malyon, a currency strategist for Scotia Capital in Toronto.
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