Bernanke Sees Financial Crisis Weighing On Economy

Washington, D.C. (AHN) - Speaking in front of the National Association of Business Economics, Federal Reserve Chairman Ben Bernanke said the financial crisis will likely drag on the economy well into next year.

Bernanke touched on the overall economy and voiced his opinion on the timing of actions the Treasury and Fed Reserve have taken to ease the financial pressures in the market.

The Fed Chairman went on to defend the timing of the moves. "We have learned from historical experience with severe financial crises that if government intervention comes only at a point at which many or most financial institutions are insolvent or nearly so, the costs of restoring the system are greatly increased. This is not the situation we face today," he said, according to the Associated Press.

He added that tight credit markets will likely lead to economic weakness into 2009 and that the economic slowdown is not just contained in the housing sector.

Bernanke noted the economy had softened some recently and pointed out that inflationary pressures have subsided of late. "In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate," he added.

With those two ingredients, coupled with Bernanke's comments; speculation has already begun on a possible rate cut when the Fed meets on Oct. 28.