Bernake to Testify on Exit Strategy

Today the Chairman of the US Federal Reserve Ben Bernanke in his testimony before the Congress emphasized that the US economy still needs low rates, however the FED may tighten policy if necessary to prevent increase in consumer prices. According to Ben Bernanke, the emergency measures will be lifted when the Federal Reserve System finds it necessary. Once the economy becomes strong enough, the Federal Reserve will act. The tools used by FED, will vary depending on how economy recovers.

Extremely low refinancing rate

“Economy still needs support of monetary policy, and work on further lifting of credit stimulus,” – added Bernanke. In terms of financial crisis the FED, US central bank, voted to lower its key interest rate to its record bottom of 0-0.25% in order to provide the necessary monetary conditions for sooner recovery of economy after it was hit by recession. The US federal funds rate remains at its historical low since December 2008.

Besides, Mr. Bernanke repeated that a hike in discount rate – an emergency credit rate – did not mean a broader tightening of credit to companies and households.

Forex rates

In the Forex market the USD fell on Bernanke testimony as EUR/USD currency pair edged higher to 1.3368 level.

Romano Prodi: Greece`s Crisis Has Bottomed Out

Romano Prodi, the former European Commission President during his interview told the reporters that Greece`s financial slump has already bottomed and there is no concern on further collapse of the European united currency system resulted from budget deficit in Greece. According to Mr. Prodi, the euro will strengthen in the Forex currency market as the other Euro-bloc countries avoid following the Greece`s way. The problem with shortfall of Greek budget deficit seems to be over now.

The deficit of budget of Greece already exerted a bad influence on the 16-nation economy as the euro tumbled to its lowest level in last 10 months.

Recently Greek officials announced they do not need cooperation with other European countries as Greece`s economy has enough strength to overcome a 12.7% budget deficit. The government decided to cut spending and to increase taxes. These plans were treated with hostility by working unions staging a series of strikes around the country.

Romano Prodi, who managed to cut Italy`s budget deficit from 7 percent to 2.7% when he was Italian Prime Minister believes that concerns over Greece debt will be subdued soon and euro will pare its losses versus other major Forex currencies.