Washington - US Federal Reserve chief Ben Bernanke warned Wednesday that the emergency action taken by the Bush administration in response to the financial crisis is unlikely to produce a swift economic recovery. "Stabilization of the financial markets is a critical first step, but even if they stabilize as we hope they will, broader economic recovery will not happen right away," Bernanke said in a speech to the Economic Club of New York.
President George W Bush's 700-billion-dollar rescue package for the financial markets provides the government with the power it needs to repair the economic damage and prevent wider fallout, Bernanke said.
"The problems now evident in the economy are large and complex, but, in my judgement, our government now has the tools it needs to confront and solve them," Bernanke said.
US exports are likely to drop as other countries suffer economically, and a slowdown in the housing market and business investment was already underway before the full severity of the financial crisis emerged, Bernanke said.
"Ultimately, the trajectory of economic activity beyond the next few quarters will depend greatly on the extent to which financial and credit markets return to more normal functioning," Bernanke said.
"Credit markets will take some time to unfreeze," he said.
Bush announced on Tuesday that 250 billion dollars of the bailout package will be injected into banks in an order to get cash into the market to free up credit. The US government will take ownership stakes in the banks in return.
Bernanke said the government will continue to evaluate the market response to the plans and adjust its approach.
"Our strategy will continue to evolve and be refined as we adapt to new developments and the inevitable setbacks," he said. "But we will not stand down until we have achieved our goals of reparing and reforming our financial system and restoring prosperity.
The economic crisis sparked sharp declines on stock markets around the world as the United States teamed with with government in Europe to draw up a common policy to address crumbling financial markets.
