22 Jul 2010

Uncertainty prevails in US economy - Bernanke

8:25 am on 22 July 2010

The head of the US Federal Reserve has warned that the outlook for the US economy remains "unusually uncertain".

Chairman Ben Bernanke told the Senate Banking Committee on Wednesday that record low interest rates would still be needed to support economic recovery.

He said the Fed was also prepared to step in with "further policy actions" to boost the economy if needed.

But the BBC reports he downplayed fears that the United States could re-enter recession.

"Even as the Federal Reserve continues prudent planning for the ultimate withdrawal of monetary policy accommodation, we also recognise that the economic outlook remains unusually uncertain," Mr Bernanke said.

"[But] rising demand from households and businesses should help sustain growth," he added.

Mr Bernanke reiterated an earlier pledge to keep interest rates at their current levels for "an extended period".

Interest rates have been held at between 0% and 0.25% - a move designed to boost lending and spending - since the depths of the financial crisis in 2008.

Mr Bernanke also told the Senate committee that inflation was less of a concern, with the Fed expecting inflation to remain "subdued over the next several years".

The US economy grew at an annualised rate of 2.7% in the first quarter of the year, having emerged from recession last year.

But high unemployment and a slowdown in manufacturing have raised concerns that the recovery is faltering.

Mr Bernanke said that although the Fed would "review its options" if the recovery weakened further, no specific measures were currently being considered for the short-term.