Washington - Federal Reserve Chairman Ben Bernanke suggested
another interest rate cut was on the way, while the US central bank
Tuesday announced fresh moves to inject liquidity into the struggling
US financial system.
Bernanke said the ongoing financial turmoil meant the outlook for
economic growth had 'worsened' in recent weeks as the availability of
credit to banks, consumers and businesses has threatened to dry up
completely.
That fact meant the Fed 'will need to consider whether the current
stance of policy remains appropriate' - a possible nod to economists
who have called for a further interest rate cut from the current 2-
per-cent level. The Fed meets later this month.
Earlier Tuesday, in its latest move to keep credit flowing through
the US economy, the US central bank created a new fund to purchase
commercial paper, a type of short-term security relied on by
companies and financial institutions to fund day-to-day operations.
The US central bank said the commercial paper markets had come
under 'considerable strain' in the last few weeks as investors have
pulled out of funding even those companies with no connection to the
subprime mortgage crisis.
The availability of loans to consumers and small businesses has
dried up as banks and financial institutions have been forced to deal
with their own capital shortfalls. Bank failures, rescues and
takeovers have sent global stock markets plunging.
The Fed did not put a dollar-figure on the commercial paper it
planned to buy. The Treasury was to make a deposit with the New York
Federal Reserve Bank to finance the fund.
Bernanke said the Fed's latest moves were designed to help
businesses that have struggled to raise the 'working capital' they
need for daily operations.
The central bank has already issued hundreds of billions of
dollars in loans to financial institutions in an effort to boost
liquidity in the system and keep banks afloat.
USA
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