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| US admits economy is in downturn |
| US Treasury Secretary Hank Paulson has admitted that the US economy is facing a "sharp decline" at the moment but hoped for a recovery later in the ye
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| UNITED STATES OF AMERICA
, 18-March-2008
10:35:53 AM |
| The news comes after the US central bank, the Federal Reserve intervened to rescue troubled bank Bear Stearns, providing $30bn in emergency support.
Mr Paulson said that he did not believe investors saw the move as a bail-out.
The Fed is expected to slash interest rates later on Tuesday to help boost confidence in financial markets.
Meanwhile, two other leading Wall Street banks reported sharply reduced profits for the first three months of the year.
Goldman Sachs posted earnings of $1.5bn, while Lehman Brothers, whose shares had fallen sharply on Monday, earned $489m, or 60% less than in the same period last year.
But the numbers were not as bad as expected, lifting Wall Street shares.
The benchmark Dow Jones stock index jumped more than 230 points, or almost 2%, to 12, 209.3. The wider Standard & Poor's index and technology-dominated Nasdaq also rose
Economists are forecasting that the benchmark US interest rate will be cut by up to one percentage point from 3% to 2%. The decision will be announced at 1815 GMT (1415 EST).
It would be the fifth rate cut since the credit crunch started.
Mr Paulson has been touring the US breakfast television studios in an attempt to reassure markets and consumers about the economic situation.
"We know we're in a sharp downclimb and there's no doubt that the American people know that the economy has turned down," he said.
He said that policy was focused on calming the financial markets.
"The big focus on the part of all policy makers is to minimise the spillover to the real economy," he added
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