Tuesday 4 September 2007

Bernanke's Pledge Fails to Dispel Pessimism

Bloomberg.com: U.S.: "Sept. 3 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke's pledge to stop the credit-market rout from wrecking the economy failed to quell concern at the Fed's Wyoming summer retreat that the U.S. is heading for recession. ``I came to Jackson Hole thinking there would be no recession, but I'm leaving thinking we could well have one,'' said Susan Wachter, a professor at the University of Pennsylvania's Wharton School, who co-wrote the first academic paper presented at the conference. This year's theme -- Bernanke said organizers had ``outdone themselves'' with a relevant topic -- was housing and monetary policy, eliciting forecasts of sliding home prices and criticism the Fed should have done more. Martin Feldstein of Harvard University warned of a ``very serious downturn'' and called on policy makers to cut interest rates by 1 percentage point. The normally academic tone of the Kansas City Fed's symposium was replaced this year by concern that the sudden increase in the cost of credit to people and companies will hurt spending and investment. Consumer confidence dropped by the most in two years in August, the Conference Board reported on Aug. 28."

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