US recovery slower than expected

Friday 27 August 2010 21.58
Ben Bernanke - Fed ready to take further steps to boost economy
Ben Bernanke - Fed ready to take further steps to boost economy

US Federal Reserve Chairman Ben Bernanke has said the US economic recovery has softened more than expected.

Mr Bernanke said the Federal Reserve is ready to take further steps if needed to stimulate the stumbling economy.

Estimates for economic growth in the US this year have been revised down to 1.6% from an earlier forecast growth of 2.4%.

He said the US would expand at a 'modest pace' in the second half of this year. He made his remarks at a Federal Reserve conference.

Mr Bernanke said: 'The committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.'

He said the US central bank's purchases of longer-term securities have been effective in lowering borrowing costs.

Mr Bernanke believes the benefits of buying more such assets, if needed, would outweigh any disadvantages.

Other options - such as committing to hold rates exceptionally low for an even longer period than is currently priced in to markets, or raising the Fed's inflation targets - would be less effective, he said.

However, he made clear the Fed has not decided what would prompt additional easing.

'At this juncture, the committee has not agreed on specific criteria or triggers for further action,' he said.

Mr Bernanke said that prospects for US growth recovery in 2011 appeared to 'remain in place'.

The Fed has already pumped in hundreds of billions of dollars into the economy since a home mortgage meltdown triggered the worst financial crisis in decades and plunged the economy into recession in December 2007.

Mr Bernanke's speech is intended to allay fears that the US could slide back into recession, the so-called double-dip scenario.

Weaker growth in America would adversely affect the export-dependent Irish economy.