Warning of the dual risks of a further economic slowdown and higher inflation, Ben Bernanke, chairman of the Federal Reserve, said Tuesday that the prospect for any immediate improvement in the U.S. economy was bleak. But the U.S. stock market, after the euro rose to a record against the dollar and markets in Asia and Europe were pushed lower by fears of further cracks in the global financial system, recovered from its own sharp fall as the price of oil plunged.
Investors may have been cheered by the decline in oil prices, but that was not necessarily a sign of improvement, since the fall was driven in part by the view that a weaker global economy may no longer be able to support oil prices above $140 a barrel. In congressional testimony, Bernanke said the markets and institutions remained under “considerable stress.” At the same time, President George W. Bush offered a more optimistic view at a news conference Tuesday, saying the U.S. economy showed “remarkable resilience” and that the country’s troubled financial system was “basically sound.” Bush said he had not decided whether to push for a second economic stimulus package, and probably will not until more is known about the effects of the first one, which provided tax rebates to millions of Americans.
The president’s news conference was scheduled to coincide with Bernanke’s testimony, which served to siphon media attention away from the Fed chief’s bleaker economic outlook. But even Bush admitted that Americans were struggling. “The bottom line is this,” he said, ” we’re going through a tough time.” (Continue Reading…)