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Obama warns Economy will worsen before we see improvements

Mon, Dec 8 2008, 11:45 GMT
by Benny Menashe

Finotec Group Inc.

President-elect Barack Obama said the U.S. recession will worsen before a recovery takes hold and that he will offer an economic stimulus plan “equal to the task” without worrying about a short-term widening of the budget deficit. Dealing with the loss of jobs, frozen credit markets, falling home prices and other signs of economic turmoil is “my number one priority,” Obama said on NBC today. Later at a Chicago news conference he said “more aggressive steps” are needed to cope with the housing crisis. Even with the prospect of a federal budget shortfall approaching $1 trillion, “we can’t worry, short term, about the deficit,” he said on NBC’s “Meet the Press” program. “We’ve got to make sure that the economic stimulus plan is large enough to get the economy moving.”

U.K. factories cut prices for a fourth month in November as the cost of petroleum products fell the most in more than two decades and the recession defused inflation pressures. Producer prices fell 0.7 percent, after declining 1 percent in October, the Office for National Statistics said in London today. The Bank of England cut the benchmark interest rate last week to 2 percent, the lowest level since 1951, as policy makers battled to prevent deflation from taking hold. Recessions in Britain and around the world have blunted manufacturers’ ability to push through price increases as factory production shrinks. The slump in Britain’s housing market is also deepening. Home values fell, HBOS Plc said on Dec. 4. Home repossessions by banks rose 12 percent in the third quarter as higher unemployment and a contraction in the economy left more Britons unable to pay their debts.

Federal Reserve Chairman Ben S. Bernanke urged using more taxpayer funds for new efforts to prevent home foreclosures, saying the private sector is incapable of coping with the crisis on its own. The Fed chief outlined four possible options, including buying delinquent mortgages and providing bigger incentives for refinancing loans. He called for addressing the “apparent market failure” where lenders aren’t modifying mortgages even in cases where it’s in their own economic interest to do so. “More needs to be done,” Bernanke said in a speech to a Fed research conference on housing and mortgage markets in Washington today. “Policy initiatives to reduce the number of preventable foreclosures should be high on the agenda.”

Today's Economic Events

Published on  Mon, Dec 8 2008, 11:47 GMT