President Barack Obama announced his intention to reappoint Ben Bernanke as chairman of the Federal Reserve on Tuesday as the White House warned of a sharp deterioration in the US fiscal outlook.

Mr Obama said it was Mr Bernanke’s “bold action and out-of-the-box thinking that has helped put the brakes on our economic freefall”. The Fed chief pledged to do everything in his power to “restore a more stable economic and financial environment in which opportunity can again flourish”.

The announcement came as the White House pro jected the budget deficit would be $2,000bn higher over the next 10 years than it had predicted. Taken with a separate forecast by the independent Congressional Budget Office, the news presented a bleak picture of America’s deteriorating debt position.

The CBO released sharply higher deficit projections predicting the 10-year deficit would reach $7,140bn, some $2,700bn more than it had thought in March. Unlike the White House’s calculations, the CBO estimate assumes all policies will stay exactly as they are.

“If you include the administration’s fiscal plans, this implies a deficit increase way in excess of $10 trillion over the next decade – the numbers are deeply alarming,” said Bill Gale, a senior economist at the Brookings Institution.

Source/Full Story: FT.com

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