November 08, 2007

Bernanke Predicts Growth Slowdown Heading Into '08

In testimony before Congress' Joint Economic Committee today, Federal Reserve Chairman Ben Bernanke had some good news and some bad news for American investors amid growing concerns on both Wall Street and Main Street.

The bad news: The current turmoil that began in the housing sector and trickled down into securities and other financial markets will likely slow economic growth in the coming year, while higher oil prices and the weak dollar could boost inflation and "impose further restraint on economic activity."

The good news: Overall, the economy "remained resilient in recent months," and "the recent developments may well lead to a healthier financial system in the medium to long term."

Specifically, Bernanke forecasted sluggish growth in the final quarter of 2007 and the first half of 2008. The Federal Reserve will be keeping a watchful eye on the various trends affecting growth and stability -- particularly the volatile mortgage market, the credit crunch and oil prices -- "and will act as needed to foster price stability and sustainable economic growth," Bernanke said. He maintained that the central bank's recent interest rate reductions have helped stabilize the economy, which he predicted will pick up at a faster rate in the latter half of 2008.

The Wall Street Journal, Bloomberg News, MarketWatch and CNNMoney.com all have more on Bernanke's testimony. And the Joint Economic Committee's Web site has transcripts of prepared remarks by the Fed chief [PDF] and Committee Chairman Sen. Charles Schumer [PDF].

Posted at 11:46 AM
Posted to: Ben Bernanke, Economy, Federal Reserve
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