Downturn in US economy ‘ending’

US Federal Reserve policymakers are increasingly confident the downturn in the US economy is ending, minutes from their latest meeting show.

The assessment by recently re-appointed Fed Chairman Ben Bernanke and his colleagues struck a more upbeat tone than the last assessment in late June.

But there was uncertainty about how quickly the economy would grow in 2010.

Unemployment, which is set to move above 10% this year, may impact on consumer behaviour, they warned.

Falling property and share values, along with the difficulty in getting credit also meant that consumers still faced “considerable headwinds”, they added.

‘More upbeat’

However the Fed said that consumer spending appeared to be levelling out and that the housing market was becoming more solid, while manufacturing was stabilising.

The prospects for US exporters will also brighten, as the economies of other countries improved, the policymakers added.

These factors led them to believe that “the downturn in economic activity was ending”, the minutes said.

The International Monetary Fund (IMF) has predicted that the US economy will expand by 0.75% next year, after earlier predicting no growth.

“The economic data look more upbeat. It doesn’t mean we will get out of this any time soon. At least there are signs we are bottoming out – that’s the first step,” said David Wyss, chief economist of Standard & Poor’s Ratings.

“Financial conditions have also improved with the some recovery in credit default swaps and in particular financial stocks.”

Stimulus impact

Last month the central bank decided to keep US interest rates on hold at between 0% and 0.25%, as widely expected by commentators.

And it added that the current low levels of interest rates will likely continue “for an extended period” to aid the continuing recovery.

The Fed and the US government have carried out a number of measures to help stimulate the US economy since the end of last year.

The main two have been President Barack Obama’s $787bn economic stimulus package, which was signed into law in February, and October’s $700bn Troubled Assets Relief Programme for the banking sector.

In March, the Fed also announced a $1.2 trillion programme of buying government debt to boost lending and promote economic recovery – a policy known as quantitative easing.

US interest rates were cut to the current level of between 0% and 0.25% in December last year, where they have remained ever since.

Before then rates had fallen steadily from a high of 5.25% in September 2007. –BBC News