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Bernanke: Housing will continue to drag U.S. economy

Fed chief says uncertainty remains over credit availability, cost

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The housing slump is expected to stymie U.S. economic growth through early 2008, Federal Reserve Chairman Ben S. Bernanke said during a speech Monday at the Economic Club of New York. "A further sharp contraction in residential construction seemed likely to hold down overall economic growth in the fourth quarter and in early 2008," Bernanke said, noting that data since the Federal Open Market Committee's latest meeting on Sept. 18 suggest "further weakening in the housing market, as sales have fallen further and new residential construction has continued to decline rapidly." While the housing market "is likely to be a significant drag on growth" over the next several months, Bernanke added, "it remains too early to assess the extent to which household and business spending will be affected by the weakness in housing and the tightening in credit conditions." While the Fed suggested in a July report to Congress that the weakness in the housing market might pull down consumer ...