WASHINGTON — The economy is in turmoil, yet President Bush and Federal Reserve chief Ben Bernanke say the country will weather the storm. Neither sees a recession on the horizon.
Both Bush and Bernanke are on the front lines of the government’s efforts to right an economy that increasing numbers of economists fear is on the verge of its first recession since 2001, if it hasn’t fallen into one already.
The housing market’s collapse, a credit crisis and galloping energy prices are crimping spending and investing. Those are mighty punches to a teetering economy that nearly stalled at the end of last year.
Bush and Bernanke acknowledged the dangers Thursday. But Bush, at a White House news conference, and Bernanke, in congressional testimony, seemed to strike the same hopeful note that the economy should be able to survive the fallout.
“I don’t think we’re headed to a recession, but, no question, we’re in a slowdown,” Bush said.
Oil prices, which have set records in recent days, shot past $102 a barrel Thursday. Pump prices rose closer to record territory above $3 a gallon, with the prospect of $4 gas when the busy summer driving season arrives.
“I hadn’t heard that. . . . I know it’s high now,” Bush said during questioning.
High energy prices are a double-edged sword for the economy: They are spreading inflation and restraining economic growth because those clobbered by big bills to fill up their gas tanks and heat their homes are cutting back spending elsewhere.
Bernanke signaled that the Fed stands ready to lower a key interest rate again to bolster the economy.
The central bank started lowering that rate in September. Over just eight days in January, the Fed reduced it by 1.25 percentage points, the biggest one-month reduction in a quarter-century.
Economists and Wall Street investors predict the Fed will cut rates again at its next meeting, March 18.
