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Tuesday, 17 March 2009

US recovery in early 2010

WASHINGTON - FEDERAL Reserve Chairman Ben Bernanke suggested in a taped interview on Sunday that the US recession could last most of the year and said the biggest risk was that the political will needed to fix the fractured financial system could be lacking.

'This (economic) decline will begin to moderate and we'll begin to see a levelling off,' Mr Bernanke said when pressed during an interview on the CBS programme 60 Minutes about whether he sees the recession ending this year.

'We won't be back to full employment. But we will, I hope, see the end of these declines that have been so strong in a last couple of quarters,' he said.

Mr Bernanke told the US Congress in January that the Fed believes there is a reasonable prospect the recession that took hold in December 2007 will end this year and that 2010 will be a year of recovery.

In the rare on-record interview, he largely stuck to that view, while suggesting recent developments may have dimmed the outlook a bit.

'We'll see the recession coming to an end probably this year,' Mr Bernanke said. 'We'll see recovery beginning next year.'

Government efforts to combat the crisis have been criticised as stock markets have plunged and unemployment has soared even as authorities have stepped in repeatedly to prop up firms such as insurer American International Group .

The financial system remains fragile, despite a US$700 billion (S$1.07 trillion) bailout of the banking system approved by Congress in October and US President Barack Obama has said more money will likely be needed to repair debt-laden banks.

The Fed chairman said his greatest worry is that lawmakers and the public will withdraw support for efforts aimed at stabilising the shattered banking system.

'The biggest risk is that, you know, we don't have the political will,' he said. 'We don't have the commitment to solve this problem, and that we let it just continue. In which case... we can't count on recovery.' -- REUTERS

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