WASHINGTON (AFP) — The US economy has turned down sharply, US Treasury Secretary Henry Paulson acknowledged Tuesday.
"What's important is we know we're in a sharp down-decline, and there's no doubt that the American people know that the economy has turned down sharply," Paulson told NBC television when asked if the United States was in a recession.
"There's turbulence in our capital markets and it's been going on since August. We're all over it," Paulson said.
"We're looking for ways to work our way through it. I've got great confidence in our markets. They're resilient. They're flexible. But this has taken some time and we're focused on it."
The US Federal Reserve was expected to cut interest rates by as much as one percentage point on Tuesday in a drastic effort to halt a mushrooming financial crisis, analysts say.
Just two days after the US central bank engineered a dramatic bailout of collapsing investment bank Bear Stearns, the Fed will meet to set its key interest rate policy against a backdrop of turbulent global markets.
Economists are anticipating a hefty cut in the federal funds rate, possibly as much as a full percentage point, as the central bank steps up its battle against a global credit crunch.
Battling the economic downturn and a credit crunch in the banks, the Fed has already slashed its federal funds rate by 225 basis points from 5.25 percent last September, in an effort to ease housing and credit market stress.
Paulson said "the Bear Stearns situation has been very painful for the Bear Stearns shareholders. So I don't think that they think that they've been bailed out here.
"But ... the big focus on the part of all policymakers is to minimize the spillover to the real economy. We need to keep our capital markets stable, functioning well," he added.
"That is important to the health of the US economy, because access to credit is very important to businesses that need to invest in great jobs. It's very important to the American people that want to borrow, to send their kids to college or to finance a home," Paulson said.
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