Fed Chairman Says Economy Likely to Slow – New York Times

Fed Chairman Says Economy Likely to Slow – New York Times:

Recession looms on credit crisis, rising energy prices, and falling dollar.

The most recent economic data since the Fed’s rate cut last Wednesday “continued to suggest that the overall economy remained resilient in recent months,” he said. At the same time, he acknowledged, investors’ fears about bad mortgage loans have intensified and could lead to tighter credit conditions. On top of that, he said, “further sharp increases in crude oil prices have put renewed upward pressure on inflation and may impose further restraint on economic activity.”

Sure the economy is resilient, but I fear it’s becoming less so as we rely more and more on foreign investment.

“But Mr. Bernanke suggested that the two rate cuts in September and October should be enough to prevent a recession, quickly adding that the central bank will be watching for new signs of trouble.”

Is he nuts? We need many incremental rate cuts or a couple of substantial rate cuts. We’re looking at less-than-zero economic growth with lots of macro factors thrown in, like a weak job market, a stock market that is near its peak (without any underlying strength), rapidly rising energy prices, shrinking investment, a hesitancy by business to expand, a credit crisis that is not only affecting the mortgage market but all other credit markets as well.



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