US Economy to Grow Below Potential

Boston Federal's Rosengren says that the US economy is to grow well below potential for the rest of 2008. US exports will weaken with slower world growth, and housing has yet to hit bottom. Economic weakness is being compounded by severe financial headwinds. Firms are holding back on spending until the economic outlook is clearer, and firms with good credit ratings are struggling to get financing. The current "liquidity lock" is worsening problems created by the credit crunch. The Fed's measures should help to restore confidence in the credit markets. Rosengren, who was speaking at the University of Wisconsin, did not discuss the interest rate outlook.