Fed Chairman Bernanke Says Economy Likely to Slow, "hasn't calculated possibility of a recession"

[Amerigo Vespucci]

Fed Chairman Says Economy Likely to Slow

By EDMUND L. ANDREWS
Published: November 8, 2007

http://www.nytimes.com/2007/11/08/business/09fed-web.html

WASHINGTON, Nov. 8 — Ben S. Bernanke, chairman of the Federal Reserve, told Congress today that the economy is going to get worse before it gets better, a message that got a chilly reception from both Wall Street and politicians. On a day when stock prices swung wildly, the dollar hit another new low against the euro and further signs emerged that consumers are growing more cautious about spending, Mr. Bernanke warned that the economy is about to “slow noticeably” as the housing market continues to spiral downward and financial institutions tighten up on lending.

But in a disappointment to investors, Mr. Bernanke offered no signal that the central bank might soften the blow by lowering interest rates for a third time this year at its next policy meeting on Dec. 11.

Stock prices, which had plunged Wednesday, went on a roller-coaster ride after Mr. Bernanke testified. The Dow Jones industrial average first fell 205 points by mid-afternoon, but then clawed back most of the way and ended the day at 13,266.29, down just 33 points.

Testifying before the Joint Economic Committee, the Fed chairman said that the two rate cuts in September and October “should” be enough to keep the economy from slipping into a recession. Without being specific, he reinforced statements by other Fed policymakers that the economy would have to show signs of stalling out entirely before they would reduce rates again. Asked if he saw any risks of a recession, Mr. Bernanke demurred. “We have not calculated the probability of a recession,” he responded. “Our assessment is for slower growth, but positive.”