Fed chief Ben Bernanke said if Congress can come to an agreement on ways to reduce the deficit, it would remove impediments to economic growth.
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Removing uncertainty about the level of security and increasing confidence about the direction of the economy would cause the economy to strengthen substantially.
Bernanke cited the effect that the fiscal cliff is having on businesses’ decisions to hold back on investments and creating jobs. He also noted the uncertainty is increasing investor caution in the financial markets along with having adverse effects on the economy.
He also said the slow recovery in housing, banks’ reluctance to lend, and the debt crisis in Europe are additional impediments to the recovery.
He did cite the improvement in the housing industry as encouraging and identified the sector as a likely source of new jobs and economic growth over the next couple of years.
He reiterated the danger of the US economy being thrown back into recession if it goes over the fiscal cliff.