The economy is not close to a 1970s-style mix of stagnant growth and high inflation, Federal Reserve Chairman Ben S. Bernanke said yesterday, but he painted a generally dour outlook and cautioned that the downturn is likely to cause some small banks to go under.
"I don't anticipate stagflation," Bernanke told the Senate Banking Committee, during his semi-annual report to Congress on monetary policy. Some analysts have become increasingly worried about that possibility after recent high readings on inflation and weak readings on growth. "I don't think we're anywhere near the situation that prevailed in the 1970s," he said.
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