Fed staff see first half economic ‘contraction’

WASHINGTON, April 8, 2008 (AFP) – Federal Reserve staff predict the US economy will contract in the first half of 2008 amid worsening housing market and credit woes, minutes from a central bank meeting revealed Tuesday. Such a downturn would be defined as a recession by most economists. Moreover, some policymakers at the central bank see the possibility of a “prolonged and severe” economic slump occurring.

The Fed minutes from to a March 18 policy meeting at which Fed policymakers slashed US short-term interest rates by three quarters of a percentage point to 2.25 percent paint a bleaker picture of the US economy.

“The staff projection showed a contraction of real GDP in the first half of 2008 followed by a slow rise in the second half,” the minutes stated.

A recession is typically marked by two straight quarters of negative gross domestic product (GDP).

The economy grew at a lackluster 0.6 percent annualized pace in the fourth quarter of 2007. A growing number of economists believe the economy has since fallen into a recession.

Fed chairman Ben Bernanke told Congress last Wednesday that it was possible the economy would fall into a recession during the first half of the year, but he said any do