Fed warns of prolonged recession, house prices fall

| February 24, 2009 | 0 Comments
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US Federal Reserve chairman Ben Bernanke has warned that unless policymakers can implement measures to stabilise the financial system, the world’s largest economy could see the recession lasting until 2010.

Mr Bernanke made the comments to the Senate Banking Committee in Washington but did state that economic turnaround depends on the success of actions taken by the administration, the Congress, and the Federal Reserve. If the measures are successful then 2010 could be a year of recovery, according to Mr Bernanke.

Attempts to revive the economy have been made in the form of lowering interest rates. The Fed has made aggressive cuts to US interest rates, which are currently at a range of zero to 0.25%.

Furthermore, the Obama administration recently signed a $787 billion (£546 billion) economic stimulus package which will include tax cuts and other measures aimed at saving jobs.

Meanwhile, the news came as the Standard & Poor’s / Case-Shiller home price index said the value of an American home has fallen 26.7% since its high in the second quarter of 2006.

House prices in the US are now at the same level they were in the third quarter of 2003.

Property prices in the country fell at a record rate in the final quarter of 2008 falling 18.2% - the largest year-on-year decline since the index commenced 21 years ago.

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