11-08-2007, 12:25 PM
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U.S. economic growth to slow: Bernanke
Quote:
U.S. economic growth to slow: Bernanke
MARTIN CRUTSINGER
The Associated Press and Staff
November 8, 2007 at 12:26 PM EST
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Quote:
WASHINGTON — Federal Reserve Chairman Ben Bernanke said Thursday that a host of economic problems, including the severe housing slump, will cause business growth to slow noticeably in coming months.
Mr. Bernanke told Congress' Joint Economic Committee that the central bank is watching developments closely, but gave no signal that it's prepared at the current time to cut interest rates even further.
Fed policy makers last week cut a key interest rate for the second time in two months, but disappointed Wall Street by discouraging expectations that it would follow with further rate cuts.
Mr. Bernanke said he and his colleagues believe economic activity will “slow noticeably in the fourth quarter” compared to the 3.9 per cent pace of the third quarter.
U.S. Fed Chairman Ben Bernanke says the U.S. economy will cool noticeably in the coming months
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“Growth was seen as remaining sluggish during the first part of next year, then strengthening as the effects of tighter credit and the housing correction begin to wane,” Mr. Bernanke said in his prepared remarks to the JEC.
Many economists believe the economy's maximum point of danger of falling into a recession will occur in the early part of next year.
A variety of problems from the steepest housing downturn in more than two decades to a severe credit crunch, surging oil prices and a falling dollar have roiled Wall Street in recent days, triggering big plunges in stock prices.
The Dow Jones industrial average plunged by 360.92 points on Wednesday, the second drop of that magnitude in the past week.
Much of that anxiety stems from a steady stream of bad company news as corporate giants such as General Motors, Merrill Lynch and Citigroup have reported huge losses.
Economists listened closely to Mr. Bernanke for hints about possible future rate cuts. But the Federal Reserve Board chairman wasn't giving much away.
"Without further evidence that the subprime financial shock and deteriorating housing markets are spilling over into other parts of the broader economy, the Fed is not in any rush to cut interest rates again," said economist Ryan Sweet of Moody's Economy.com.
BMO Capital Markets economist Sal Guatieri said even without a clear indication from Mr. Bernanke, investors should assume that the Fed will act if the economy unwinds or the credit crunch worsens.
"Bernanke may not have his finger on the easing trigger, but he likely won't hesitate to squeeze again if distress in structured debt markets continues or the economy weakens more than anticipated." Mr. Guatieri said in a note to clients.
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