KEY POINTS:
Ben Bernanke signalled that the Federal Reserve may not yet be done cutting US interest rates, even as he said that he believed the country would skirt a recession this year.
The Fed chairman, appearing on Capitol Hill before the Senate banking committee, said with the economy deteriorating, and further declines expected in the US housing market, the Fed "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks".
Although those remarks appeared less urgent than statements before previous rate cuts, Bernanke did also refer to signs of continuing stresses in the credit markets.
These stresses have crimped the availability of capital to individuals, businesses and banks, Bernanke said: "A significant worsening in financial conditions or in credit availability would certainly be a warning bell that we need to take further action."
His words helped affirm expectations in the financial markets, which have been betting on a further half-percentage point cut in rates at the next meeting of the Fed's open market committee next month.
The Fed has slashed US interest rates from 5.25 per cent to 3 per cent since last September, in a string of moves that included a 75 basis point emergency cut when global stock markets threatened to crash last month.
With economists debating whether the US is headed for, or already in, a recession, Bernanke said he believed that growth would be "weak but positive" in the first half of the year and then strengthen as the effects of previous rate cuts and a fiscal stimulus package agreed by Congress kicked in.
- INDEPENDENT
