The Business

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Markets comforted by Bernanke pledge

Updated April 27, 2012 01:20:47

Federal Reserve chairman Ben Bernanke says the US will continue to stimulate its economy if necessary.

Source: The Business | Duration: 2min 40sec

Topics: economic-trends, banking, markets, world-politics, international-financial-crisis, england, united-states, european-union


TICKY FULLERTON, PRESENTER:  The US economy may be showing signs of life, but it's nowhere near ready to come off life support. Global markets were comforted by the Federal Reserve chairman Ben Bernanke's pledge to continue stimulating the economy if necessary.

Across the Atlantic, the numbers confirmed the UK was in recession, but the government's sticking by its austerity program.

Here's Phillip Lasker.

PHILLIP LASKER, REPORTER:  In a Western world facing economic stagnation, offers to print more money to stimulate growth are warmly welcome.

BEN BERNANKE, CHAIRMAN, US FEDERAL RESERCE:  Those tools remain very much on the table and we will not hesitate to use them should the economy require that additional support.

SALLY AULD, JP MORGAN RATES ANALYST:  We did see policymakers overnight reiterate the need for very expansionary policy to be kept in place well into 2014 and I guess that's a reflection of how vulnerable they see the US economy at present.

PHILLIP LASKER:  But those assurances helped lift the global market mood against the backdrop of setbacks in Europe.

ED MILIBAND, LABOUR LEADER:  Mr Speaker, today we had the catastrophic news that Britain is back in recession.

DAVID CAMERON, BRITISH PRIME MINISTER:  This is a tough and difficult situation that the economy is in, but the one thing we mustn't do is to abandon public spending and deficit reduction plans because the solution to a debt crisis cannot be more debt.

PHILLIP LASKER:  The UK's numbers reinforce the view that Europe is also in recession as governments try to cut spending while growing their economies. But businesses know that once the recession passes, conditions won't be much better.

DAVID HALL, POLYPIPE CHIEF EXECUTIVE:  We can't sit holding our head in our hands worrying about being low growth because that's the way it's going to be. That is the new norm.

PHILLIP LASKER:  Analysts predict Europe's Central Bank will need to pump more cheap money into the region's banks, but the ECB isn't expecting strong demand from borrowers.

MARIO DRAGHI, ECB PRESIDENT:  In the current environment, this is likely to remain subdued, thus money and credit growth may stay weak for some time before the overall economic situation improves.

PHILLIP LASKER:  And investors know that improvement can easily be delayed or derailed.

ROBERT HALVER, BAADER BANK RESEARCH HEAD (voiceover translation):  There is a danger that European politics will act like a bull in a china shop again and hit in a negative fashion the financial markets.

PHILLIP LASKER:  Analysts say it's a fragile environment, which helps the case for a Reserve Bank interest rate cut next week. Without it, Australia's lenders might follow the ANZ.

SALLY AULD:  That really increases the chance that were the RBA not to cut rates, the banks might be forced to move independently in adjusting their lending rates upwards.

PHILLIP LASKER:  Something the economy definitely doesn't need.