Ben Bernanke reassures investors on economy

Calcutta News.Net
Saturday 28th August, 2010

New figures released by the US government show that the US economy is weaker than expected and will remain weak throughout the rest of the year, raising concerns of a second recession or a dreaded ‘double-dip’.

The Federal Reserve had initially predicted the US economy would grow by 2.4% in the first half of 2010, which would have been disappointing to start with, but new revisions have put 2010’s growth thus far closer to 1.6%.

Ben Bernanke, the head of the Federal Reserve, moved quickly to reassure investors, promising that the government was ready to provide additional stimulus funds to keep the recovery on track, but there are doubts as to how much more the Fed can do.

Interest rates are already at zero and have failed to encourage investment, while the US Congress remains unwilling to provide more stimulus funds at a time when the government’s deficit is spiraling upward.

In a speech to reassure markets, Bernanke outlined measures that could be taken, such as the Federal Reserve buying more securities such as government debt and mortgage investments, which it is hoped would drive down interest rates on debt and encourage private-sector spending.

The speech prevented a drop in the markets with the Dow Jones finishing Friday 164 points higher and above the 10,000 mark.

The Federal Reserve has said it expects stronger growth in 2011, though investors are worried the US economy may in-fact be about to stall, growth in the first quarter was 3.7%, more than twice the current spluttering rate.

The unemployment rate, which remains above 9%, is also proving to be dangerous deadweight for the US economy.

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