In a dramatic change of tone, Ben Bernanke yesterday indicated that the Federal Reserve is ready to cut interest rates agGREssively to ward off the risk of a US recession.
The Fed chairman said “we stand ready to take substantive additional action as needed to support growth and to provide additional insurance against downside risks”.
The language – which initially sent stocks soaring – represents a new message from the Fed, which as recently as December emphasised the uncertainty surrounding the economic outlook.
Investors said Mr Bernanke’s comments would reinforce expectations the Fed will cut interest rates by 50 basis points at its policy meeting this month.
The S&P 500 index, which had been down, rallied sharply, though gains later subsided. Treasury yields pared their earlier rise, while the dollar fell against the euro, trading 0.8 per cent lower at $1.4783.
The Fed chairman said demand for housing “seems to have weakened further.” High oil prices, lower equity prices and softening home values were also likely to “weigh on consumer spending.”
He warned that the financial situation “remains fragile and many funding markets remain impaired.” Financial conditions “continue to pose a downside risk to the outlook for growth.”
Earlier, the European Central Bank stepped up its warnings that eurozone rates may yet rise, even though the ECB left rates unchanged at 4 per cent.
Jean-Claude Trichet, ECB president, said the bank was prepared to act “pre-emptively” to avoid excessive wage demands.
但特里谢承认，美国经济所面临的风险正不断成为现实，他本月宣布两次新的美元流动性拍卖。与此同时，英国央行(Bank of England)也维持英国利率不变。
But Mr Trichet admitted that risks to the US economy were materialising and announced two fresh auctions for US dollar liquidity this month. Meanwhile, the Bank of England also left UK interest rates unchanged.