Aug. 22 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke and European Central Bank President Jean-Claude Trichet said the world economy is pulling out of its deepest recession since the 1930s.
“Prospects for a return to growth in the near term appear good,” while “critical challenges remain,” including possible further losses for financial firms, Bernanke said yesterday. Trichet said “green shoots” aren’t enough for him to declare the recovery sustainable and that officials “have an enormous amount of work to do.”
Economic reports this week showed unexpectedly strong signals of a rebound in the U.S., Germany and France. U.S. purchases of previously owned homes climbed 7.2 percent in July to the highest level in almost two years, indicating the housing crisis that crippled the world’s largest economy is easing.
U.S. stocks gained for a fourth day, with the Standard and Poor’s 500 Index rising 1.9 percent in New York to the highest level since October. Benchmark 10-year notes yielded 3.57 percent, up 13 basis points from Aug. 20.
Even with the economy on the mend, Bernanke said “strains persist in many financial markets across the globe, financial institutions face additional significant losses and many businesses and households continue to experience considerable difficulty gaining access to credit.” Recovery “is likely to be relatively slow at first, with unemployment declining only gradually from high levels.”
Later in the day, Trichet, 66, spoke from the audience during a debate period, saying, “I am a little bit uneasy when I see that because we have some green shoots here and there, we are already saying, ‘Well, after all, we are close to back to normal.’”
“We know that we have an enormous amount of work to do and we should be as active as possible,” Trichet said without elaborating on a forecast.
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