Page last updated at 18:43 GMT, Wednesday, 7 May 2008 19:43 UK

Paulson sees end of credit crunch

Henry Paulson
Mr Paulson has ruled out another economic stimulus package

US Treasury Secretary Henry Paulson has said that the worst of the credit crunch may have passed.

He said the financial market turmoil that has led to massive losses at Wall Street banks had eased.

"We're closer to the end of this than the beginning," Mr Paulson told the Associated Press news agency.

However, he acknowledged that the US economy was still facing tough times as people coped with soaring petrol prices and a weak job market.

He said rising energy prices could limit the effect of a $168bn (86bn) package to stimulate the economy through tax rebates.

Later this year, I expect growth will pick up
Henry Paulson, US Treasury Secretary

"Obviously, the high price of gasoline is unwelcome and is a challenge and is a headwind," he said.

The rebate cheques reached bank accounts last week.

Oil prices have hit a record level of $123 a barrel and this has been reflected in pump prices.

'Growth to pick up'

Many economists expect the US to fall into a recession this year as a housing slump and market turmoil take their toll on the wider economy.

But Mr Paulson said he expected the economy to improve this year as the tax rebates get businesses and consumers spending again.

"We will get some help from the stimulus," Mr Paulson said.

"Later this year, I expect growth will pick up."

The US Federal Reserve has also slashed interest rates seven times since September last year to revive the economy.

Mr Paulson ruled out a second stimulus package for now.

'Bumps in the road'

Mr Paulson said the credit crisis, which began last summer, has eased since March, when Bear Stearns, the fifth largest US investment bank, almost collapsed.

However, he said that credit markets were still not functioning in a normal manner.

Mortgages, student loans and the lending that takes place between financial institutions were all still affected by the credit squeeze, he said.

"I wouldn't be surprised at all to see more bumps in the road," he said.

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