Bernanke does not rule out ‘weak recession’ in 2013

Bernanke does not rule out 'weak recession' in 2013

This could even lead to a "weak recession" early next year, bernanke said in his semi-annual report to the US senate banking committee. He warned urgently of the risks of the euro crisis for the american and global economy. "The possibility that the situation in europe will deteriorate further remains a crucial threat to the outlook," he said tuesday.

At the same time, the fed chief made it clear that the central bank was ready to trim the economy with further m easures. However, he did not name any specific steps. Historically low interest rates should be maintained at least until the end of 2014.

With growth of just two percent, the U.S. Economy had lost considerable momentum in the first half of 2012. In the second half of 2011, the increase was still 2.5 percent. For the second half of 2012, "an even smaller increase" must be expected, said bernanke, without, however, committing himself to a more precise forecast.

The fed chief referred to recent estimates that growth could be between 1.9 and 2.4 percent this year, and between 2.2 and 2.8 percent next year. However, he emphasized the fiscal risks ("fiscal cliff") due to the expiry of tax relief and savings cuts in the 2013 state budget.

If all of the upcoming m reductions were actually implemented next year, he did not rule out a slide into a mild recession in early 2013. This could also mean that 1.25 million fewer jobs than expected were created in the coming year. Bernanke calls job market situation frustrating. He expects the unemployment rate to remain at seven percent or even higher until the end of 2014 – currently 8.2 percent of americans are without a job.

Bernanke’s gloomy picture is also a major setback for president barack obama, who must fear for his re-election in november. Economic situation and unemployment are main topics of the election campaign.

Bernanke identified two main threats to the u.S. Economy: "the first is the banking crisis in the euro zone, the second is the budget situation in the u.S.A."."He specifically mentioned the crisis in greece, the situation of spanish banks and the general situation in the european banking sector.


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