Bernanke cautious over economic recovery

The head of America’s Federal Reserve warned today that the country’s economy would remain shaky for months to come.

Ben Bernanke told Congress that a fresh round of government economic stimulus was a good idea.

His remarks marked his first endorsement of another round of energising stimulus to follow the midyear tax rebates.

Congressional Democrats have been pushing a stimulus, but the Bush administration has been cool to the notion.

“With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate,” he said.

A trio of hard blows from the housing, credit and financial crises has pounded the economy badly.

Many analysts predict the economy will shrink late this year and early next, which would meet the classic definition of a recession. Some believe the economy already jolted into reverse during the July-to-September quarter.

The nation’s unemployment rate, now at 6.1%, could hit 7.5% or higher by next year, according to some predictions.

Mr Bernanke suggested that Congress design the stimulus package so that it would be timely and well-targeted and would limit the longer-term affects on the government’s budget deficit, which hit a record high in the recently ended budget year.

Any stimulus package would need to kick in quickly to entice people and businesses to boost spending and buck up the economy during the period in which economic activity would be otherwise weak, he said.

He added that the package should also should include provisions that would help break through the stubborn credit clog that is playing a major role in the economy’s slowdown.

Mr Bernanke’s nod for another round of stimulus comes with the knowledge that a flurry of drastic actions by the Federal Reserve and the Bush administration has yet to unlock lending and calm financial markets.

More on this topic

Alison O'Connor: Each decade brings stark choices that impact our nation’s childrenAlison O'Connor: Each decade brings stark choices that impact our nation’s children

Letter to the Editor: Another bust is comingLetter to the Editor: Another bust is coming

Eurozone recession fears on the riseEurozone recession fears on the rise

Did big economies get it wrong after the crash?Did big economies get it wrong after the crash?

More in this Section

Belfast International Airport announces voluntary redundancy programmeBelfast International Airport announces voluntary redundancy programme

Consumers warned to be alert to investment scams by fake companiesConsumers warned to be alert to investment scams by fake companies

EASA in agreement with Ryanair's Michael O'Leary that passengers now safe to fly amid Covid-19EASA in agreement with Ryanair's Michael O'Leary that passengers now safe to fly amid Covid-19

'In a nutshell': Credit Unions impacted by Covid-19 call for state support as loan demand drys up'In a nutshell': Credit Unions impacted by Covid-19 call for state support as loan demand drys up


Lifestyle

One word: iconic.90s celebrity power couples who were serious style goals back in the day

Alanis Morissette, celebrating 25 years since Jagged Litle Pill, talks to Ken Lexington on self-medication, love addiction, anxiety, depression and anger as an important lifeforceFor Alanis Morrisette, anger is an energy

Another week, another fiendishly fun test of your arts and showbiz knowledge from Irish Examiner Arts Editor Des O'DriscollScene & Heard: Fun culture quiz

The story of how the Cork-based executive head chef faced her “demons” and turned around her life just before her 30th birthday.This is me: Trisha Lewis transforms her body and mindset

More From The Irish Examiner