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Bernanke says America will avoid double dip

Chairman of the Federal Reserve Ben Bernanke expects the American economy to expand in the second half of 2010 and to continue growing into 2011.

Addressing global central bankers in Jackson Hole, Wyoming, he said that incoming data suggests the recovery of output and employment in America has slowed in recent months.

In the last week the American stockmarket has faltered, with the Dow Jones falling below the 10,000 level, following weak housing data.

“Much of the unexpected s slowing is attributable to the household sector, where consumer spending and the demand for housing have both grown less quickly than was anticipated,” Bernanke said.

“Consumer spending may continue to grow relatively slowly in the near term as households focus on repairing their balance sheets. I expect the the economy to continue to expand in the second half of this year, albeit at a relatively modest pace.”

Bernanke made his speech shortly after the Bureau of Economic Analysis revised its first estimate of US GDP growth down from 2.4 per cent to 1.6 per cent.

However, despite the weaker data seen recently, Bernanke added the preconditions for a pickup in growth in 2011 appear to remain in place. If this recovery should falter, or inflation decline further, the chairman of the Fed added that policy options are available to provide additional stimulus.

“Any deployment of these options requires a careful comparison of benefit and cost,” he said. “However, the Committee will certainly use its tools as needed to maintain price stability – avoid excessive inflation or further disinflation – and to promote the continuation of the economic recovery.”

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