Risk of US downturn has faded: Bernanke

Risk of US downturn has faded: Bernanke

 

WASHINGTON – UNITED States Federal Reserve Chairman Ben Bernanke said the danger that the United States has fallen into a ‘substantial downturn’ appears to have faded – despite a big jump in the unemployment rate.

The central bank chief also stoked expectations for interest rate hikes this year in a speech on Monday, saying the recent rise in oil prices was adding to inflation risks.

 

Last Friday, fears were rekindled that the US could be headed for a deep recession after the unemployment rate surged and oil prices registered their biggest single-day leap.

 

But Mr Bernanke on Monday night said the government report showing the jobless rate rising from 5 per cent in April to 5.5 per cent in May – the biggest one-month jump in two decades – was ‘unwelcome’. However, the Fed chief said other forces should ‘provide some offset to the headwinds that still face the economy’.

 

The Fed’s powerful doses of interest rate cuts, the government’s US$168 billion (S$228.8 billion) stimulus package, further progress in the repair of problems in financial and credit markets, a gradual ebbing of the drag from the deep housing slump and still solid demand from abroad for US exports should help the economy over the remainder of this year, he said.

 

Although economic activity is ‘likely to be weak’ during the current April-to-June quarter, Mr Bernanke said ‘the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so’.

 

Source: Straits Times

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