Top policymakers say U.S. should avoid recession
Fed chief says further rate cuts can be made to offset weakness in the economy.
WASHINGTON — The nation's top two economic policymakers predicted Thursday that the U.S. economy is likely to dodge a recession, but just barely, while the economy itself threw off conflicting signals about whether it is improving or deteriorating.
Federal Reserve Chairman Ben S. Bernanke told a Senate committee that "the outlook for the economy has worsened in recent months and the downside risks to growth have increased."
Bernanke said central bank officials were ready to cut interest rates further to offset the effect of a slumping housing market, weak employment and financial institutions that remain deeply reluctant to lend.
And he suggested the effort would ultimately prove successful.
"My baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth latter this year as the effects of monetary policy and fiscal stimulus begin to be felt," he told the Senate Banking Committee.
Speaking before the same panel, Treasury Secretary Henry M. Paulson Jr. declared that the economy was "strong, diverse and resilient," although he acknowledged it was undergoing what he described as "a significant and necessary housing correction."
He predicted that the economy would continue growing, although, he added, "its pace in the coming quarters will be slower than what we have seen in recent years."
peter.gosselin@latimes.com
