The United States Federal Reserve will do whatever is necessary to prevent damage to the economy from the credit crunch that has gripped Wall Street, a Fed official said Monday, warning it will take time for financial markets to fully recover from the strains.
Fed Governor Randall Kroszner's remarks came as fears about the credit crunch and a painful housing slump have gripped investors in recent months, causing stocks to nosedive.
Wall Street took another sharp plunge - 366 points - on Friday, but had a slight reversal on Monday, inspired by strength in the technology sector and reversing early losses triggered by nervousness about the credit and housing markets and uneven earnings.
In early afternoon trading, the Dow rose 57.15, or 0.42 per cent, at 13,579.17, after falling more than 100 points early in the session. Broader stock indicators also rebounded. The S&P 500 index rose 6.66, or 0.44 per cent, to 1,507.29, and the technology-dominated Nasdaq composite index rose 28.58, or 1.05 per cent, at 2,753.74.
Monitor developments
"The Federal Reserve will continue to monitor developments in financial markets and act as needed to support the effective functioning of these markets and to foster sustainable economic growth and price stability," Kroszner said in a speech to the Institute of International Bankers.
It is the same pledge that Federal Reserve Chairman Ben Bernanke and other central bank colleagues have been making in the past months - that is, to keep the economy growing and inflation under control.
Some economists believe the Fed will lower an important interest rate at the end of a two-day meeting next Wednesday, to help bolster economic activity. But others, citing the economy's resilience and worries about an inflation flareup, think the Fed will leave rates alone.
Oil prices, which had surged to record highs in recent weeks, have eased a bit, but are still hovering above US$86 a barrel.
- AP