In his testimony before Congress, Fed Chairman Ben Bernanke admitted that the economy is slowing and that it could actually contract in the first half of the year, even conceding that a recession was “possible.”
That’s the bad news.
The good news is that he, and many other economists, feel that with the recent stimulus package (i.e. rebates to taxpayers), plus the moves the Fed has made to help alleviate the credit crisis, will grow in the second half of 2008, stating “Much necessary economic and financial adjustment has already taken place, and monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year.”
Although not directly stating it, Mr. Bernanke also hinted that the Fed might not act as quickly to cut interest rates again, instead opting to see how the stimuli in the “pipeline” will play out.
Let’s hope Mr. Bernanke and the economists at the Fed get it right so that if we are in “recession” it ends up being a relatively mild and short one.