In his most positive statement on the global financial crisis to date, Federal Reserve Chairman Ben Bernanke has said the recession in the US, the worst since the 1930s, is probably over.
Speaking at the Brookings Institution, a year after the full-blown crisis hit financial markets, Mr Bernanke said the economy is likely growing now, but he also warned it would not be sufficient to prevent the unemployment rate, now at a 26-year high of 9.7 per cent, from rising further.
Wall Street hits 2009 high
"The recession is very likely over at this point," Bernanke said, in response to questions.
But he also warned that that the economy faced some "ongoing headwinds" and that the pace of growth in 2010 would be moderate.
He cited ongoing financial and credit problems, lower household debt levels and further adjustments in the economy as potential factors that would hold back growth, notwithstanding the depth of the recession.
He said the economy needed to grow faster than the underlying potential growth rate to start reducing America's high unemployment.
Analysts expect to see annualised growth of 3 to 4 per cent in the third quarter, which ends on September 30, with growth buoyed by strong car sales and a rise in retail trade.
New figures overnight showed retail sales rose 2.7 per cent in August, the biggest increase in more than three years, boosted by higher petrol prices and car sales that rose sharply under a targeted subsidies program.
Mr Bernanke said he was confident Congress would enact a revamp of the nation's financial regulation to prevent a future crisis from happening.
"I feel quite confident that a comprehensive reform will be forthcoming," Mr Bernanke said. It has been "too big a calamity" over the past year, with the near meltdown of the US financial system, for Congress not to take action, he added.
President Barack Obama on Monday urged Congress to enact legislation this year and attacked Wall Street, saying the lessons of the financial crisis must be heeded.
