Bernanke: US economic outlook uncertain

Ben Bernanke

US Federal Reserve Chairman Ben Bernanke has sent ripples of concern through Wall Street by saying that the country's economic outlook remains "unusually uncertain".

Speaking to the Senate Banking Committee, Bernanke said that "record low interest rates would still be needed to support economic recovery" and that further actions from the government may be needed to boost growth.

"Even as the Federal Reserve continues prudent planning for the ultimate withdrawal of monetary policy accommodation, we also recognize that the economic outlook remains unusually uncertain," Mr Bernanke said in a pre-written statement.

"[But] rising demand from households and businesses should help sustain growth,"

As a result of his words, Wall Street equities fell to a 1.3 per cent loss and short-term US government bond yields dropped to record lows as investors' fears about a US slowdown were brought to the fore.

Bernanke's words also followed President Obama signing a bill that passed the biggest overhaul of financial regulations since the Great Depression.

Holding rates

Plans to keep US interest rates at their current low levels have been extended, in order to keep lending and spending in the wake of the recession. As a result, interest rates are between zero percent and 0.25 percent.

Bernanke said that, despite the economy growing by 2.7 percent in the first quarter of the year, inflation was to be "subdued over the next several years."

Despite such initial growth, high unemployment and a slowdown in US manufacturing has raised concerns that the United States isn't out of the woods just yet. However, Bernanke did state that growth continues at a "moderate pace," and reaffirmed predictions that US gross domestic product will grow between three percent and 3.5 percent this year.

The head of the committee, Senator Chris Dodd summed up the feeling by saying: "In short, it look likes our economy is in need of additional help."

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