Federal Reserve Chairman Ben Bernanke today said tight global credit markets continue to threaten global economic growth.
By restricting flows of credit to households, businesses and state and local governments, the turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth, Mr. Bernanke said at a New York Economic Club luncheon.
Opening the credit markets would remain a top priority for the Fed, Mr. Bernanke added; he did not rule out more interest rate cuts by the Fed alone or in concert with other nations central banks.
We will continue to use all the tools at our disposal to improve market functioning and liquidity, to reduce pressures in key credit and funding markets and to complement the steps the Treasury and foreign governments will be taking to strengthen the financial system, Mr. Bernanke said.
But he warned that monetary policy has its limits and cannot always solve economic problems.
Mr. Bernanke said he was concerned about the increased market perception of some companies being too big to fail. He said stronger regulatory oversight was needed to prevent another cannot fail situation similar to when the U.S. government placed Fannie Mae and Freddie Mac under the oversight of the U.S. government in September to keep them from collapsing.