Fears the US economy has entered a substantial downturn have eased over recent months, Federal Reserve chairman Ben Bernanke claims.
Speaking in Massachusetts overnight, Bernanke shrugged off Friday’s jobless rate jump which pounded Wall Street, saying overall economic indicators are more positive.
“Despite the unwelcome rise in the unemployment rate that was reported last week, the recent incoming data, taken as a whole, have affected the outlook for economic activity and employment only modestly,” he says.
“Indeed, although activity during the current quarter is likely to be weak, the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.
“Over the remainder of 2008, the effects of monetary and fiscal stimulus, a gradual ebbing of the drag from residential construction, further progress in the repair of financial and credit markets, and still-solid demand from abroad should provide some offset to the headwinds that still face the economy.”
Bernanke conceded rising inflation has created a problem for the Fed, one which requires “close attention”.
“The latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations,” he says.
“The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations, as an un-anchoring of those expectations would be destabilizing for growth as well as for inflation.”IFAonline
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