Bernanke Gives a Grim Prediction

Federal Reserve Chairman Ben Bernanke said today that the economy will most likely slow in the months ahead, but he gave no indication that the Fed would cut interest rates. Bernanke cited the meltdown in housing, which has yet to bottom out, as well as tighter credit conditions and a surge in oil prices as the foremost factors behind the projected economic downturn. Bernanke, however, did not predict any kind of recession, saying the Fed's previous interest rate cut would prevent this.

Importantly, Bernanke reminded the Joint Economic Comittee that inflation was the pervasive element governing all the Fed's actions. He was clear to refer first to the Fed's attention to price stability and second to its interest in sustainable growth.

The bottom line is that the projected growth of this year's economy, 4%, is no longer a reality and that the more likely figure at the end of the quarter will be closer to 1%.