07 October 2008 19:55 [Source: ICIS news]
WASHINGTON (ICIS news)--The US Federal Reserve will likely cut its key interest rates still further at its next rate-setting meeting at the end of October, Fed Chairman Ben Bernanke suggested on Tuesday.
In his first major policy speech since Congress passed a $700bn (€518bn) financial rescue bill last week, the Fed chairman said that worsening economic conditions and lower inflationary risks mean that the ?xml:namespace>
Bernanke was referring to the Fed’s policy on its key federal funds interest rate, which has been held at 2% since April this year.
In a speech to business economists in
He reviewed steps taken by the Fed, the Bush administration and Congress in recent weeks to deal with the spreading crisis, leading up to last week’s passage of the Emergency Economic Stabilization Act, which authorises the US Treasury Department to buy up non-performing mortgage loans and mortgage-based securities.
Bernanke also noted that a new Federal Reserve funding plan announced earlier on Tuesday will help restore liquidity to the commercial paper market that many companies use to finance daily operations.
However, he said, even with the extensive rescue and recovery measures being put into play by the
But he also noted that falling oil prices mean that inflationary pressures have held steady or eased.
The outlook for economic growth has worsened and the prospects for inflation have somewhat improved, Bernanke said.
“In light of these developments the Federal Reserve will need to consider whether the current stance of policy remains appropriate”, he said.
In Fed-speak, that is seen as a broad hint of another interest rate cut when the Fed next meets on 28-29 October, or even before.
($1 = €0.74)
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