Bernanke: Recession in 2008?

Federal Reserve Chairman Ben Bernanke has uttered the “R” word. Responding to a question at today’s Joint Economic Committee hearing, Mr. Bernanke said publicly for the first time that “recession is possible” for the economy this year.

But he cautioned that a recession is a technical term determined by the National Bureau of Economic Research, a group of academic economists that monitors growth patterns and usually makes determinations about a recession months after such a downturn has started. “I’m not yet ready to say whether or not the U.S. economy will face such a situation,” he said. (Some economists consider a recession to be two straight quarters of economic contraction, though the NBER uses a looser definition looking at a wider range of data.)

Mr. Bernanke said he expects slower growth for the economy, and that the Fed is centering its policies on addressing that. Asked whether the economy is contracting right now, he said “our estimates are that we are slightly growing at the moment” but reiterated a comment from his prepared testimony that there’s a chance of a contraction.

Mr. Bernanke said in his prepared remarks: “It now appears likely that real gross domestic product [GDP] will not grow much, if at all, over the first half of 2008 and could even contract slightly. We expect economic activity to strengthen in the second half of the year, in part as the result of stimulative monetary and fiscal policies.” But, he added, “the uncertainty attending this forecast is quite high and the risks remain to the downside.”

from the WSJ blog