Bernake calls for further US interest rate cuts

The Chairman of the Federal Reserve, Ben Bernanke, has signalled that they may need to drastically take further action, even if this means bringing interest rates down to zero percent.

In a bid to reassure the markets, it would be unprecedented for a reduction to bring interest rates below the 1 percent threshold this month. However, the Fed’s Chief has announced that this will be the centre of discussions at the central bank’s next policy meeting, on 15th and 16th December.

The Federal Reserve has already extended its commercial paper lending facility and by accepting damaged mortgage assets in a discount lending window, it is hoped the increase in liquidity will bring down the cost of borrowing.

Bernanke has insisted that despite the current economic conditions, policymakers will do all they can to avoid repeating the Great Depression of the 1930s, stating that the current situation was overblown.

The US economy has declined at an annual rate of 0.5 percent in the third quarter and analysts have predicted that it will continue to fall further in the final part of the year.

Bernanke has revealed that the only other practical options available are injecting money into the economy by buying up long-term US Treasury bonds and other securities, in an aim to bring down interest rates.

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