Minneapolis Federal Reserve Bank president Gary Stern yesterday said it will “take time” to restore confidence to financial markets and that therefore a further economic softening is likely.
However, Stern, a voting member of the Fed’s policymaking Federal Open Market Committee, sounded hopeful that the U.S. economy will not go into a severe recession.
He likened the current financial crisis to the credit crunch and recession of the early 1990s. But while the “economic restraint” that results from the current crisis “could exceed” the “brief but not especially mild” recession of the 1990s, he said economic and financial conditions were sounder going into the current crisis than the earlier one.
Going forward, Stern suggested the Fed needs to rethink its hands-off approach to asset price bubbles, but said it would need to be “measured” in any efforts to deflate such bubbles.
— Market News International
