US warns of 'sluggish' economy

Federal Reserve chairman's comments come a day after Bush signs off stimulus deal.

    The subprime mortage crisis has hit
    the US economy hard [AFP]


    Bernanke said the package would begin to take effect mid-year.

    "My baseline outlook involves a period of sluggish growth, followed by a
    somewhat stronger pace of growth starting later this year," he said.

    "[The stimulus deal] will have an impact as early as the third quarter, maybe even a little bit in the second quarter."

    However US stocks fell following Bernanke's comments to the senate banking committee, with the Dow Jones index down 93 points at noon local time (1700 GMT). 

    Poor economic data

    Thursday's stimulus deal provides many US households with between $300 and $1,200 in tax rebate cheques, which the government hopes people will spend to boost the economy

    Global fears of a US recession have grown after a flood of poor economic data from the US.

    The US economy grew by just 0.6 per cent in the last quarter of 2007 and the housing market has plummeted following the subprime mortgage crisis.
     
    In January, the job also market shrank for the first time in 53 months.

     

    The Reserve has also made several sweeping cuts in interest rates
    since September from 5.25 per cent to three per cent.

    The actions included an emergency three-quarter-point cut on January 22 and another half-point reduction at its regular meeting only one week later.

    SOURCE: Agencies


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