Although Paulson signalled near-term concerns, he said the long-term fundamentals of the U.S. economy are "strong" and that markets are closer to the end of credit problems than the beginning. Still, he said there could be "bumps" in the road to recovery.

The Federal Reserve cut short-term interest rates by a quarter-point on Wednesday. Paulson said he supported the move and has "great confidence" in the Fed.

On the U.S. dollar, Paulson said exchange rates will eventually reflect the strength of the U.S. economy.

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