The economy should bottom out and begin to rebound later this year, Federal Reserve Board chairman Ben Bernanke told the congressional Joint Economic Committee yesterday.

“We continue to expect economic activity to bottom out, then to turn up later this year,” Bernanke said, according to a prepared text released by the Fed yesterday. “Key elements of this forecast are our assessments that the housing market is beginning to stabilize and that the sharp inventory liquidation that has been in progress will slow over the next few quarters. Final demand should also be supported by fiscal and monetary stimulus. An important caveat is that our forecast assumes continuing gradual repair of the financial system; a relapse in financial conditions would be a significant drag on economic activity and could cause the incipient recovery to stall.”

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