U.S. Federal Reserve Chairman Ben Bernanke said Monday that further contraction in housing market is likely to be a "significant drag" on U.S. economic growth in the current quarter and through early next year.
"However, it remains too early to assess the extent to which household and business spending will be affected by the weakness in housing and the tightening in credit conditions," Bernanke said in a speech to the New York Economic Club. A copy of his remarks was made available in Washington.
The Fed will be closely following indicators of household and business spending as it updates its outlook for near-term growth, he said.
He said the evolution of employment and labor income will also be watched, as "gains in real income support consumer spending even if the weakness in house prices adversely affects homeowners' equity."
"The labor market has shown some signs of cooling, but these are quite tentative so far, and real income is still growing at a solid pace," Bernanke said.
Talking about the recent financial market turmoil, Bernanke said "conditions in financial markets have shown some improvement since the worst of the storm in mid-August, but a full recovery of market functioning is likely to take time, and we may well see some setbacks."
"In particular, investors are continuing to reassess the risks they face and have not yet fully regained confidence in their ability to accurately price certain types of securities," he said.
The ultimate implications of the credit crunch on the broader economy remain uncertain, said the chairman.
He pledged that the central bank "will continue to watch the situation closely and will act as needed to support efficient market functioning and to foster sustainable economic growth and price stability."
In an effort to help cushion the economy from the ill effects of the credit crunch and housing slump, the Fed cut a key short-term interest rate by one-half percentage point to 4.75 percent on Sept. 18, the first rate reduction in more than four years.
The Fed is expected by some economists to cut the rate again this year.
Source:Xinhua
|
Comment
Tell A Friend
Print Format
Save Article