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Fed chief: Recession or 'serious situation,' same basic idea

July 15, 2008 | 11:12 am

Federal Reserve Chairman Ben S. Bernanke didn’t call it a recession today, but he might as well have.

In his semiannual congressional testimony on the economy, the Fed chief delivered a sober assessment that left no doubt about the central bank’s priorities.

Remember his tone in June, hinting that the Fed might soon raise interest rates to battle inflation pressures? Forget that -- despite another scary inflation report today.

Bernankesenate Bernanke’s speech "strongly suggests that Fed officials do not have their fingers on the tightening trigger," Goldman Sachs economists said in a note.

The Fed chief said policymakers felt that "considerable uncertainty surrounded their outlook for economic growth and viewed the risks to their forecasts as skewed to the downside."

Asked whether he thought the country was officially in recession, he said: "People are very worried, so I certainly would never make the claim that even if we were not in a technical recession, that it wasn’t a serious situation."

The stock market took this hard at first, with the Dow Jones industrial average diving 227 points early on. But the market has since rebounded, helped by a drop in oil prices that also appears to be driven by Bernanke’s recession-like tone.

Near-term crude futures in New York were down $6.71 to $138.47 a barrel at about 11 a.m. PDT. The Dow was basically flat at 11,060.

But Bernanke’s comments brutalized the dollar. The euro spiked to a record high of $1.604 today from $1.592 on Monday.

Photo: Ben Bernanke before the Senate Banking Committee today. Joshua Roberts/Bloomberg News