US decline slowing, says Bernanke
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The decline in the American economy is showing early signs of slowing, according to Ben Bernanke, the chairman of the Federal Reserve.
In a speech at Morehouse College in Atlanta yesterday, Bernanke said: “Recently we have seen tentative signs that the sharp decline in economic activity may be slowing, for example, in data on home sales, homebuilding, and consumer spending, including sales of new motor vehicles.
“A levelling out of economic activity is the first step toward recovery.”
The Federal Reserve’s intervention has also been a step towards financial stability, which is necessary for economic recovery, he added.
Describing the crisis in financial markets as the worst since the Great Depression of the 1930s, Bernanke said the damage to the economy caused by constrained credit flows has been extensive. He also emphasised the impact on the job market, industrial production and households, and the Fed’s role in freeing up liquidity in the markets.
“The Federal Reserve will continue to take the necessary steps to unclog the credit markets and strengthen the economy,” he said
Discussing the threat of inflation in the future as a result of the Fed’s fiscal stimulus packages, Bernanke said it is a risk he is taking seriously.
“To be sure, decisions about when and how quickly to proceed will require a careful balancing of the risk of withdrawing support before the recovery is firmly established versus the risk of allowing inflation to rise above its preferred level in the medium term,” he said.
“However, this delicate balancing of risks is a challenge that central banks face in the early stages of every economic recovery. I believe that we are well equipped to make those judgments appropriately.”
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