WASHINGTON –warned Wednesday the economy may shrink over the first half of this year and that “a recession is possible.” Yet, he didn’t offer any assurances of further interest rate cuts.
Bernanke’s testimony to the Joint Economic Committee was a much more pessimistic assessment of the economy’s immediate prospects amid a trio of crises — housing, credit and financial.
“It now appears likely that gross domestic product (GDP) will not grow much, if at all, over the first half of 2008 and could even contract slightly,” Bernanke told lawmakers. GDP measures the value of all goods and services produced within the United States and is the best barometer of the United States’ economic health. Under one rule, six straight months of declining GDP, would constitute a recession.
Still, Bernanke said that he expects more economic growth in the second half of this year and into 2009, helped by the government’s $168 billion stimulus package of tax rebates for people and tax breaks for businesses as well as the Fed’s aggressive reductions to a key interest rate. Nevertheless, the chairman acknowledged uncertainty about the Fed’s next steps, notwithstanding the mounting economic woes.