Second US rescue plan mooted
More warnings about fragile state of UK and world economies offered as global recession becomes more realistic prospect
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Monday, 20, Oct 2008 07:58
The chairman of the Federal Reserve has admitted that the United States could need further government measures to reinvigorate the economy.
Ben Bernanke told Congress that a follow-up to last month's Wall Street bailout package would be "appropriate".
The Fed chief also hinted at further interest rate cuts, as the US joins economies around the world in stuttering into recession.
"With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate," Mr Bernanke told a House of Representatives committee.
"The stabilisation of the financial system, though an essential first step, will not quickly eliminate the challenges still faced by the broader economy."
Earlier, more warnings were offered about the fragile state of the UK and world economies as a global recession became a more realistic prospect.
An influential report said Britain was already in recession and predicted a one per cent constriction in the economy this year, while China provided the first indication that it was not immune from the collapse of financial institutions in the west.
On Monday the Chinese government revealed growth had slipped into single digits for the first time in almost four years.
In the first nine months of 2008 growth stood at 9.9 per cent, compared to 11.9 per cent for the whole of last year, Beijing said.
"The growth rate of the world economy has slowed down noticeably,” government statistics spokesman Li Xiaochao said.
"There are more uncertain and volatile factors in the international economic climate... and all these factors have started to release their negative impact on China's economy."
In Japan, where an emergency G8 summit aimed at reinvigorating the global financial system will be held next month, the government said it wanted developing economies to participate as well.
"This is not a problem only for the Group of Eight countries," said chief cabinet secretary Takeo Kawamura, revealing that Brazil, China and India were all likely to be invited to attend.
In the UK, the Ernst and Young Item Club followed the British Chambers of Commerce in claiming the country was already in recession.
The warning came as Lloyds TSB reported business confidence levels had fallen to a record low in September, while the latest house price index showed its largest-ever fall in asking prices.
Last month the government pledged £400 billion towards bailing out the country’s banks, but despite the markets initially being soothed, the threat of recession has since seen stocks stumble in a second wave of jitters.