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Thursday, February 28, 2008

Bernanke Signals Fed Prepared to Lower Rates Again

Federal Reserve Chairman Ben S. Bernanke signaled the U.S. central bank is prepared to lower interest rates again even as inflation accelerates.

The Fed ``will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,'' Bernanke said in testimony to the House Financial Services Committee in Washington.

Bernanke's remarks may reinforce investors' expectations that policy makers will lower rates further to shore up the faltering economy. While officials have expressed concern that inflation is accelerating, Bernanke indicated he shares Vice Chairman Donald Kohn's view that financial-market turmoil and slowing growth pose the ``greater threat.''

Bernanke's testimony came as government reports today showed the U.S. expansion, now in its seventh year, is in peril. Durable-goods orders fell 5.3 percent, more than forecast, in January as companies cut spending. New-home sales fell last month to the lowest level since February 1995 and house prices slid by a record 15 percent from a year ago.

``The Fed is in full risk-management mode, which means it has to prioritize financial market stability and growth over inflation,'' said Diane Swonk, chief economist of Mesirow Financial Inc. in Chicago. ``The discussion of inflation and inflation expectations, however, effectively sets the stage for a fairly quick normalization of rates once growth stabilizes.''

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Economic Event Calendar

GMT+5:30 Event Vol. Actual Consensus Previous
Tuesday, Jun 03
19:30 Fed's Bostic speech 2
19:30 JOLTS Job Openings 2 7.391M 7.100M 7.200M Revised from 7.192M
n/a GDT Price Index 1 -1.6% -0.9%
22:15 Fed's Goolsbee speech 2
22:30 Fed's Cook speech 2
Wednesday, Jun 04
n/a Total Vehicle Sales 1 16.3M 17.3M
02:00 API Weekly Crude Oil Stock 1 -4.236M
04:30 AiG Industry Index 2 -15
04:30 Ai Group Manufacturing PMI 1 -26.5
04:30 S&P Global Services PMI 2 50.5 50.5
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