Bernanke: US Recession May End In 2009; Recovery To Start in 2010

25 February, 2009

Here is an optimistic statement from US Federal Reserve Chairman Ben Bernanke. He said the recession should end in 2009 and 2010 “will be a year of recovery”. However, there is a rider – the actions taken by the government should lead to some stabilisation in financial markets. But for now, the US is undergoing a “severe contraction,” Bernanke said in prepared remarks to the Senate Banking Committee. He said that the contraction “appears to have continued into the first quarter of 2009.”

Bernanke said: “If actions taken by the Administration, the Congress, and the Federal Reserve are successful in restoring some measure of financial stability–and only if that is the case, in my view–there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery.”

Bernanke added,  “the outlook for economic activity is subject to considerable uncertainty” and “the downside risks probably outweigh those on the upside”.  One risk is the “global nature of the slowdown”, while the second is the “destructive power of the so-called adverse feedback loop, in which weakening economic and financial conditions become mutually reinforcing”.

He asserted a need to complement fiscal stimulus with strong government action to stabilise financial institutions and financial markets so that they can break the adverse feedback loop.

Bernanke’s full statement is available here.

 


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Bernanke: US Recession May End In 2009; Recovery To Start in 2010

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