Tuesday, November 20, 2012
Budget fight threatens US recession, Bernanke says
Federal Reserve Chairman Ben Bernanke said today that 2013 could be a "very good year" for the US economy if politicians can strike a quick deal to avoid the so-called fiscal cliff.
Bernanke called for a credible long-term framework to put the federal budget on a sound path, but warned against action that would needlessly add to the headwinds facing the economy.
He repeated a warning that running over the "cliff" of expiring tax cuts and government spending reductions could derail the US recovery, and said worries over how budget negotiations will be resolved were already damaging growth.
"Such uncertainties will only be increased by discord and delay," he told the Economic Club of New York.
"In contrast, cooperation and creativity to deliver fiscal clarity - in particular, a plan for resolving the nation's long-term budgetary issues without harming the recovery - could help make the new year a very good one for the American economy."
Bernanke reiterated the central bank's guidance that it expects to keep interest rates near zero until at least mid-2015, but offered few clues into how the Fed might tweak its bond-purchase program at the start of next year.
"We will want to be sure that the recovery is established before we begin to normalize policy," he said.
Bernanke called for a credible long-term framework to put the federal budget on a sound path, but warned against action that would needlessly add to the headwinds facing the economy.
He repeated a warning that running over the "cliff" of expiring tax cuts and government spending reductions could derail the US recovery, and said worries over how budget negotiations will be resolved were already damaging growth.
"Such uncertainties will only be increased by discord and delay," he told the Economic Club of New York.
"In contrast, cooperation and creativity to deliver fiscal clarity - in particular, a plan for resolving the nation's long-term budgetary issues without harming the recovery - could help make the new year a very good one for the American economy."
Bernanke reiterated the central bank's guidance that it expects to keep interest rates near zero until at least mid-2015, but offered few clues into how the Fed might tweak its bond-purchase program at the start of next year.
"We will want to be sure that the recovery is established before we begin to normalize policy," he said.
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