In a rare joint appearance before a congressional committee Thursday, the U.S. treasury secretary and the head of the central bank said the U.S. economy has weakened but will probably avoid recession. VOA's Barry Wood reports.
Federal Reserve Board Chairman Ben Bernanke said the outlook for growth has worsened in recent months and faces a sluggish growth outlook for the near future.
"Growth looks to be weak but still positive during the first half of the year, and with some expectation of strengthening later in the year," he said. "But again, that is a baseline and there are risks to that forecast."
The central bank will issue a revised forecast in the next few days. The International Monetary Fund, in a forecast released last month, marked down its estimate of U.S. growth to 1.5 percent for the year.
Treasury Secretary Henry Paulson was slightly more optimistic in his remarks to the Senate Banking Committee.
"The risks are to the downside," he said. "We're watching it carefully. I think this economic [stimulus] growth package. We're all focused on this. And there are no guarantees. But I continue to believe that this economy is going to keep growing."
Some private sector economists believe the economy has already entered a recession, which is defined as six consecutive months of negative growth.
In their questions, lawmakers were particularly concerned about the prolonged downturn in the housing market and the inability of the credit markets to function smoothly. Treasury Secretary Paulson said he is watching the markets closely.
"Our principle here has been how do we prevent a market failure," he said. "How do we prevent those housing foreclosures that are avoidable."
For the first time in decades, U.S. home prices declined nationwide last year. In an effort to boost economic growth the central bank has aggressively cut interest rates, and says it will continue lowering rates as needed.