Ben Bernake, the US Federal Reserve Chairman, announced that additional financial strains in the economy have dimmed the overall economic outlook. However, these strains have led to the openness of additional interest rate cuts during the upcoming weeks, something that can help aid the overall economic health.
The Fed has already lowered overnight interest rates by three-quarters of a percentage point since mid September. By lowering interest rates, the Fed hoped to buffer the economy from a prolonged housing slump and credit market, but the interest rate cuts thus far have had little or no effect on the economic strength.
Ben Bernake stated, “The outlook has been importantly affected over the past month by renewed turbulence in financial markets, which has partially reversed the improvement that occurred in September and October. We at the Fed will have to remain exceptionally alert and flexible.”
Bernake closed by adding, “”In making its policy decision, the committee will have to judge whether the outlook for the economy or the balance of risks has shifted materially. In doing so, we will take full account of the implications for the outlook of both the incoming economic data and the ongoing developments in the financial markets.”
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