US Central Bank Ponders Further Cash Boost
9:47pm UK, Friday August 27, 2010
America’s top banker has stated the US Federal Reserve will have to think about making large-scale investments if the economy deteriorates further.
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Ben Bernanke, chairman of the central bank, admitted that the economic recovery and rate of employment had both fallen short of expectations.
He described the economic outlook as “inherently uncertain” and stated the economy remained vulnerable to unexpected developments”.
The Fed chairman stopped short of committing to any specific action.
But he raised the prospect of “additional monetary accommodation through unconventional measures” – most likely the buy of government debt – if the outlook were to deteriorate.
Mr Bernanke’s remarks came as he outlined the forecasts for the world’s biggest economy at a meeting of central bankers in Jackson Hole, Wyoming.
Shortly before his speech, the US revised down its estimate for economic growth – the latest indicator that suggests the nation’s economy has slowed to a crawl.
With austerity measures looming, economists warn us that this could be as good as the recovery gets for now – slower growth could be on the cards towards the end of the year.
Sky’s Dharshini David on latest UK economic figures
Gross domestic product (GDP) expanded at a 1.6% annual rate between April and June, the Commerce Department said, instead of the 2.4% pace it had estimated last month.
Commenting on the figures from Washington, Sky’s US correspondent Greg Milam said: “It’s a sign that any recovery in the US is losing momentum.
“Stimulus spending has ended, home buying is slowing considerably and companies who were building up stockpiles of inventory have now done all that spending.
“Meanwhile, there is a huge gap growing between imports and exports.
“The real fear here is that these signs suggest the recovery is going to take a lot longer than hoped.”
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Although the GDP revision may fuel concern that slowing growth is putting the US economy at risk of slipping back into recession, the revised data is not quite as weak as expected.
Analysts had predicted a revision to 1.4% annualised growth – a huge slowdown compared to the 3.7% pace recorded for the first three months of the year.
A 32% surge in imports dragged down the latest GDP figure by creating a gaping trade deficit, as exports rose only 9%.
But Americans showed an appetite for buying goods, imported or otherwise, and consumer spending was revised up to 2% for the quarter.
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Submited at Saturday, August 28th, 2010 at 12:00 am on Business by jessica
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