Fed chairman Bernanke says US recession 'may last into 2010'

Wednesday, February 25, 2009

Ben Bernanke

Federal Reserve Chairman Ben Bernanke said that the current economic recession in the United States "may last into 2010." The Chairman also predicted that unemployment would remain at relatively high levels until 2011.

However, Bernanke added that 2010 could be a year of recovery if the government was able to restore some financial stability.

He made the statements to the Senate Banking Committee on Tuesday.

"It is essential that we continue to complement fiscal stimulus with strong government action to stabilise financial institutions and financial markets," Bernanke said. "If actions taken by the administration, the Congress, and the Federal Reserve are successful in restoring some measure of financial stability — and only if that is the case, in my view — there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery."

Bernanke also warned that there is a risk that the downturn could become steeper. "This outlook for economic activity is subject to considerable uncertainty, and I believe that, overall, the downside risks probably outweigh those on the upside," he said.

The chairman also delivered the Federal Reserve's estimates on the economy, which were released last week. They predict that the US economy will shrink by 0.5% to 1.3% this year. The unemployment rate is estimated to increase to between 8.5% and 8.8%, from its current level of 7.6%.

Bernanke said that he was "committed to using all available tools to stimulate economic activity and to improve financial market functioning".

US stock markets closed higher after Bernanke's testimony, with the Standard and Poor's 500 index gaining four percent.