15 February 2008

U.S. sinks deeper...

The following article is excerpted from the 15 February 2008 edition of “globeandmail.com”.

Sluggish growth, more interest rate relief, but no recession.

That's the latest status update on the slumping U.S. economy from Federal Reserve Board chief Ben Bernanke as he testified Thursday before the Senate banking committee.

With the economy still deteriorating, he vowed that the central bank would act in a “timely manner” as an insurance policy against an even steeper downturn….

Mr. Bernanke also painted a grim picture of the housing market, which he said is continuing to worsen due to tighter lending standards….

Mr. Bernanke has been reluctant to acknowledge the possibility that the U.S. may be headed for recession, even though many Wall Street economists say the country is already in one. But he conceded the Fed's next quarterly forecast, due out shortly, would show “lower projections of growth” that are “reasonably consistent” with private sector numbers.

U.S. Treasury Secretary Henry Paulson, testifying alongside Mr. Bernanke, also rejected the possibility of a recession, which is typically marked by at least two quarters of shrinking economic activity….

Credit problems that began in the housing sector have spread to other areas of lending, forcing up interest costs for many businesses and even local governments. Meanwhile, the first signs of trouble have emerged in the job market, where employment fell in January for the first time in nearly five years.

What's more, high energy costs and falling stock prices are weighing on consumer confidence.

Economists interpreted Mr. Bernanke's comments as a pledge to cut the central bank's benchmark interest rate next month….