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WORLD> America
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Bernanke: Markets under stress; outlook uncertain
(Agencies)
Updated: 2008-07-16 00:37 TIGHT SPOT Sluggish economic growth and stubborn inflation have put Bernanke in a tight spot as he tries to keep a lid on pricing pressures without tipping the economy into a deep recession. The usual policy prescription of hiking rates to curb the acceleration in prices, largely coming from costlier energy, might dampen an already slow pace of economic activity. Pressure has grown -- both inside his policy-making committee and out -- for the Fed to consider raising interest rates after cutting them by 3.25 percentage points to 2 percent since mid-September. Shortly before Bernanke testified, government reports underlined the dilemma. Sales at retail stores barely edged up in June but producer prices, which reflect wholesale inflation, jumped a larger-than-expected 1.8 percent. News from the corporate arena was no more reassuring. General Motors Corp (GM.N), struggling with declining vehicle sales, said it will cut 20 percent of its salaried work force, while Kimberly-Clark Corp (KMB.N) cut its profit outlook because of high energy costs. Bernanke said the Fed's efforts to date, including the rate cuts and a series of new lending facilities, had positive effects but the economy still faced "numerous difficulties." "Many financial markets and institutions remain under considerable stress, in part because the outlook for the economy, and thus for credit quality, remains uncertain," he said. "Helping the financial markets to return to more normal functioning will continue to be a top priority of the Federal Reserve," he added. |
