Housing's in the tank, banks are scared to lend, but oil is at $100 a barrel and inflation is threatening to pick up -- what's a central banker to do?
Federal Reserve Chairman Ben Bernanke will deploy his most reassuring bedside manner in congressional testimony on Wednesday and Thursday to explain how the U.S. central bank, which has already cut interest rates 2-1/4 percentage points since mid-September, can trim them further to prevent recession without letting inflation get out of hand.
"Near-term, the economy remains extremely vulnerable to further contraction because business sentiment has deteriorated further and the aggressive Fed easing to date has been partially offset by tighter financial conditions," Deutsche Bank economists wrote in a note to clients. "This means the Fed is going to have to cut rates further, which is the message Mr. Bernanke will deliver."
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