The Chairman of the American Federal Reserve (FED) Ben Bernanke announced on Friday that this central monetary institution will do what is necessary to prevent the current difficulties in the mortgage market from halting the six-year economic expansion of the USA.
"The FED continues to monitor the situation and will act when necessary to limit the negative effects on the broader economy that may arise from disruptions in the financial market," Bernanke said at the annual symposium of the central bank of the USA in Wyoming. "Further tightening of credit conditions, if it continues, will increase the risk that the current weakness in the housing market will deepen and last longer than previously expected," he warned. Bernanke’s assessments are the first since losses in the so-called subprime mortgage market have increased the cost of loans for consumers and companies. The FED reduced the interest rate on direct loans to banks two weeks ago.
"The FED remains prepared to take additional measures to ensure liquidity and the normal functioning of the market," Bernanke said in a speech that was highly anticipated on Wall Street, where bankers believe that the central bank should reduce pressure on lenders and stabilize the market by lowering the benchmark interest rate. Wall Street reacted positively to the governor’s speech, which strengthened predictions that the FED will lower the benchmark interest rate for the first time in four years at its next meeting on September 18. The rate, which currently stands at 5.25 percent, is expected to be reduced by a quarter or even half a percentage point, CBS News reported. All three major stock indices on Wall Street rose by more than one percent on Friday, with the Dow Jones Industrial Average increasing by 119 points, closing the daily trading at 13,357 points, while the Standard & Poor’s 500 index rose by 16.35 points, closing at 1,473.99 points.
