4
Sep
Downturn in US economy 'ending'
US Federal Reserve policymakers are increasingly confident the
downturn in the US economy is ending, minutes from their latest
meeting show. The assessment by recently re-appointed Fed Chairman
Ben Bernanke and his colleagues struck a more upbeat tone than the
last assessment in late June. But there was uncertainty about how
quickly the economy would grow in 2010. Unemployment, which is set
to move above 10% this year, may impact on consumer behaviour, they
warned.
Falling property and share values, along with the difficulty in
getting credit also meant that consumers still faced "considerable
headwinds", they added.
'More upbeat'
However the Fed said that consumer spending appeared to be
levelling out and that the housing market was becoming more solid,
while manufacturing was stabilising. The prospects for US exporters
will also brighten, as the economies of other countries improved,
the policymakers added. These factors led them to believe that "the
downturn in economic activity was ending", the minutes said. The
International Monetary Fund (IMF) has predicted that the US economy
will expand by 0.75% next year, after earlier predicting no growth.
"The economic data look more upbeat. It doesn't mean we will get
out of this any time soon. At least there are signs we are
bottoming out - that's the first step," said David Wyss, chief
economist of Standard & Poor's Ratings. "Financial conditions
have also improved with the some recovery in credit default swaps
and in particular financial stocks."
Stimulus impact
Last month the central bank decided to keep US interest rates on
hold at between 0% and 0.25%, as widely expected by commentators.
And it added that the current low levels of interest rates will
likely continue "for an extended period" to aid the continuing
recovery.
The Fed and the US government have carried out a number of measures
to help stimulate the US economy since the end of last year. The
main two have been President Barack Obama's $787bn economic
stimulus package, which was signed into law in February, and
October's $700bn Troubled Assets Relief Programme for the banking
sector. In March, the Fed also announced a $1.2 trillion programme
of buying government debt to boost lending and promote economic
recovery - a policy known as quantitative easing. US interest rates
were cut to the current level of between 0% and 0.25% in December
last year, where they have remained ever since. Before then rates
had fallen steadily from a high of 5.25% in September 2007.
BBC News. (2009). Downturn in US economy 'ending'. [Online].
Available from: http://news.bbc.co.uk/1/hi/business/8235069.stm
Accessed 4th September 2009.