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Fed Chief Signals Another Rate Cut

By JEANNINE AVERSA,

Posted: 2008-03-28 09:57:24

Filed Under: Recession Watch

WASHINGTON (Feb. 28) - Federal Reserve Chairman Ben Bernanke told Congress Thursday that the U.S. is "not anywhere near" the dangerous stagflation situation that prevailed in the 1970s.

With the economy slowing and inflation rising, fears have grown that the country could be headed for the dreaded twin evils of stagnant growth and rising prices known as "stagflation."

"I don't anticipate stagflation," Bernanke told the Senate Banking Committee.

Still, high energy prices and rising inflation does complicate the Fed's job of trying to keep the economy growing and inflation contained, Bernanke acknowledged.

High energy prices are creating "inflationary stress," Bernanke said. And, that is "complicating" the Fed's work in terms of shoring up the economy, the Fed chief said.

President George W. Bush, at a news conference Thursday, noted the slow economic growth but said the nation isn't headed into a recession.

He rejected calls for additional stimulus efforts, instead advising patience. "Why don't we let stimulus package one, which seemed like a good idea at the time, have a chance to kick in?" Bush said at the White House.

Bernanke's testimony in the Senate caps back-to-back appearances on Capitol Hill that started in the House on Wednesday. The Fed chief's overarching economic message was the same on both days: The Fed stands ready to lower a key interest rate yet again to bolster the struggling economy.

Many fear the U.S. is hurtling toward a recession or is in one already.

The central bank started lowering a key interest rate in September. Over just eight days in January, the Fed shaved 1.25 percentage points, the biggest one-month reduction in a quarter century. Economists and Wall Street investors predict the Fed will cut rates again at its next meeting, March 18.

Just before Bernanke testified, the government reported that the economy nearly stalled in the final quarter of last year. It grew at a pace of just 0.6 percent, a big loss of momentum compared with the prior quarter's brisk 4.9 percent growth rate.

Bernanke indicated he is prepared to lower rates even as high oil prices heighten inflation risks.

Copyright 2008 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. All active hyperlinks have been inserted by AOL.

2008-02-27 10:08:53

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62 comments

Take20pct 09:46:19 AM Feb 28 2008

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HOMELESS,
HUNGRY,
NEED EUROS,
GOD BLESS

Mitchelmrodr 07:40:44 AM Feb 28 2008

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Rago Boy 58 is right on! AOL is definitely trying to control the message...American comment is getting better and better and the powers that be won't tolerate it!

GPuffy262 07:22:32 AM Feb 28 2008

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Sickening to see this nonsense happening all over again. You know the old adage "Fool me once shame on you, fool me twice shame on me?" Well it's highly appropriate for what is happening right now with Bernanke pulling the same stunt as his predecessor Greenspan. SURE. Lower interest rates AGAIN, encourage more debt, more deficit spending and the dollar losing value almost daily. Beat up the people who are trying to save some money and get a decent rate of return on their savings. So much for 5% online savings accounts huh? DON'T let the business cycle run it's normal course of contraction that it needs to go through after years of Wall Street tricksters artificially prolonging the "expansion". All of a sudden inflation is not the priority, now it's economic growth when the country should be accepting a normal slow-down and speculators have to take their lumps for being overextended. It's Orwellian how "revision" is in fact "revisionism". Ron Santelli a reporter for CNBC has a good gri

RAGO BOY 58 05:21:53 AM Feb 28 2008

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I WOULD MAKE A COMMENT BUT AOL REMOVES THEM AS SOON AS THEY ARE MADE,

Phch11 11:07:11 PM Feb 27 2008

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I believe when Ben is done with his rate cuts, the price of oil will be well over $100/barrel. The price of gas will hover at around at $ 4.00 / gallon( today the average is $ 3.00/gallon).The dollar will be finished as well.

Considering that US uses around 200 billion gallons of crude oil every year , we will be paying around $250 billion dollars more on oil alone this year. This is more then $160 billion used for the economic stimuli. Talk about new conundrum.Of course you idiots, it's called inflation.

PLlove49 10:33:56 PM Feb 27 2008

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Still using and taking real estate as collateral?

Brettze 08:23:51 PM Feb 27 2008

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WE ARE WORKING ON BULLSHIT GASIFICATION PILOT PLANTS DOTTING ACROSS AMERICA. WE WILL BE ENERGY INDEPENDENT ON BULLSHIT!

HCSword 08:16:14 PM Feb 27 2008

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Our central bank has two mandates, which means we have no mandate. The only mandate they should have is to keep the dollar purchasing power stable. You cannot devalue your way to prosperity. Inflation very evident to everyone with eyes to see. Lowering interest rates makes inflation worse and the dollar worth less. Raise interest rates and defend the dollar. Let the markets work. If companies and people fail, they made the wrong bet. Someone will buy whatever is left at a price the market determines. There will always be losers and winners in capitalism, let the market decide. Don't try to interfere. The government should be compassionate toward the losers. No one should starve, go naked, or without shelter or medical care. A country as rich as ours can do this. The very rich can and should pay a higher federal tax rate than 35%. A rediculous rate for the super rich. HCS

Brettze 07:51:48 PM Feb 27 2008

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WE ARE WORKING ON BULLSHIT GASIFICATION PILOT PLANTS DOTTING ACROSS AMERICA. WE WILL BE ENERGY INDEPENDENT ON BULLSHIT!

Brettze 07:51:26 PM Feb 27 2008

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Type your own comment herWE ARE WORKING ON BULLSHIT GASIFICATION PILOT PLANTS DOTTING ACROSS AMERICA. WE WILL BE ENERGY INDEPENDENT ON BULLSHIT!e

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