US Fed describes outlook as ‘uncertain’
US Federal Reserve chairman, Ben Bernanke, has said the outlook for the world’s largest economy remains “unusually uncertain”.
The US housing market, in particular, has experienced a double-dip in activity after the expiration of a Government incentive.
Furthermore, higher unemployment and a slowdown in manufacturing have sparked fears of a “double-dip” recession.
However, Mr Bernanke has said it is unlikely that the US could re-enter recession but said the Fed will take action to boost the economy, if needed.
It was revealed earlier this week that consumer prices fell for the third consecutive month in June, by 0.1% on a monthly basis, raising fears of deflation.
Deflation (where prices fall rather than increase) can be a serious threat to an economy because it deters consumers and businesses from spending in expectation of falling prices.
Speaking before the Senate Banking Committee, Mr Bernanke said: “We remain prepared to take further policy actions as needed to foster a return to full utilisation of our nation’s productive potential in a context of price stability.”
He added: “Even as the Federal Reserve continues prudent planning for the ultimate withdrawal of monetary policy accommodation, we also recognise that the economic outlook remains unusually uncertain.
“[But] rising demand from households and businesses should help sustain growth,” he added.
The comments were not received well and the Dow Jones Industrial Average slipped 1.3%.
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