“It now appears likely that gross domestic product (GDP) will not grow much, if at all, over the first half of 2008 and could even contract slightly,” Bernanke told lawmakers. GDP measures the value of all goods and services produced within the United States and is the best barometer of the United States’ economic health. Under one rule, six straight months of declining GDP, would constitute a recession.

Bernanke said “a recession is possible” but he also said he expects more economic growth in the second half of this year and into 2009, helped by the government’s $168 billion stimulus package of tax rebates for people and tax breaks for businesses as well as the Fed’s aggressive reductions to a key interest rate.

Bernanke has been getting a lot of good press in recent months for his actions regarding the financial markets implosion. Perhaps he’s just managing expectations with the latest remarks. Investors have been relatively pessimistic with today’s trading, so it’s doubtful his comments will be taken in a positive manner.

Is Bernanke subliminally flipping the world “the bird”?

The Fed said it was cutting the federal funds rate, the interest that banks charge each other on overnight loans, to 3.5 percent, down by three-fourths of a percentage point from 4.25 percent.

The Fed action was the most dramatic signal it can send that it is concerned about a potential recession in the United States. It marked the biggest one-day move by the central bank in recent memory.

The Fed decision was taken during an emergency telephone conference with Fed officials on Monday night. Those discussions occurred after global financial markets had plunged Monday as investors grew more concerned about the possibility that the United States, the world’s largest economy, could be headed into a recession.

The Fed has been cutting rates nearly continuously, despite increasing fears of inflation. The thought is that cutting the Fed Fund rate will encourage lower interest rates on credit cards. It might also encourage more people to save, promoting higher CD Rates. With the world’s largest economy on the skids, it would only take a slight push to send the world into a global slowdown. These latest measures are designed to stop such a skid. Only time will tell if the strategy is sound.