Federal Reserve chairman Ben Bernanke has said he supports efforts to put together a package to stimulate the US economy. That is something that is under consideration by the Bush administration and Washington lawmakers.
Bernanke also gave a Congressional Budget Committee meeting a bleak assessment of the economy’s health: “Recently, incoming information has suggested that the baseline outlook for real activity in 2008 has worsened and that the downside risks to growth has become more pronounced.”
He added: “Consequently, the FOMC must remain exceptionally alert and flexible, prepared to act in a decisive and timely manner and, in particular, to counter any adverse dynamics that might threaten economic or financial stability.”
To prevent a recession, the US central bank has signalled its readiness to slash interest rates by a hefty half-percent this month.
Fortis Bank analyst Philippe Gijsels said the U.S. may face two quarters of negative economic growth, which is one definition of a recession, leading to longer term economic problems: “We have seen some weak economy figures, the ISM index (an indicator of US manufacturing activity) below 50, retail sales very weak, the job market extremely weak, which basically means that it looks like the problems are not going to go away anytime soon. Visibility for the companies is really low, so we think we have a tough quarter and a tough number of quarters ahead of us.”
Tough quarters too for the banks. On Thursday Merrill Lynch announced a huge quarterly loss of 6.6 billion euros because of an 11.37 billion euro writedown in the fourth quarter, mostly from bad subprime mortgage bets.