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Fed officials play down rate
cut expectations
Ros Krasny
Reuters
Friday, April 4, 2008
For the second time this week, a senior Federal Reserve
official conceded the United States economy could slip into recession,
but suggested the central bank should wait to see if more rate
cuts are needed.
"The economy has all but stalled and could contract over
the first half of the year," San Francisco Federal Reserve
President Janet Yellen, who is not a voter on the policy-setting
committee in 2008, said on Thursday.
"Current indicators suggest that, starting in the fourth
quarter, the economy, at best, slowed to a crawl," she said,
adding later that the Fed is still battling a "negative feedback
loop" of tight credit conditions, falling house prices and
low consumer confidence.
(Article continues below)
Yellen's remarks, in a speech to the Stanford Institute for Economic
Policy Research, echoed those from Fed Chairman Ben Bernanke during
testimony to a Congressional Joint Economic Committee on Wednesday.
"Recession is possible," Bernanke said. "There's
a chance that for the first half as a whole, there might be a
slight contraction."
But, like Bernanke, Yellen declined to point the way toward additional
interest rate cuts to pull the economy out of its malaise.
Instead, she forecast a minor pickup in growth in the second
half on the back of rate cuts already in the pipeline, and "timely"
fiscal stimulus checks -- even though the drag from falling house
prices will linger into 2009.
Full
article here.
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