Tags: Ben | Bernanke | Rates | Low | Extended | Period

Bernanke: Rates to Stay Low for 'Extended Period'

Thursday, 15 Apr 2010 10:12 AM

 

  Comment  |
   Contact  |
  Print  
|  A   A  
  Copy Shortlink
A moderate U.S. economic recovery is likely to warrant very low interest rates for a long time, Federal Reserve Chairman Ben Bernanke testified on Wednesday.

Refusing to rule out the risk of a "double-dip" recession, Bernanke told lawmakers inflation is not an immediate concern, giving the Fed room to maintain its highly stimulative policies.

"The Federal Open Market Committee has stated clearly that they currently anticipate that very low, extremely low rates will be needed for an extended period," Bernanke said in response to questions from lawmakers of the Joint Economic Committee.

However, he stressed that this commitment was based upon certain conditions in the economy, including underused productive capacity, high unemployment and anchored inflation expectations.

"If those conditions cease to hold and we anticipate changes in the outlook then of course we will respond to that," Bernanke added.

He said inflation figures remain subdued, and long-term inflation expectations remain contained.

A government report on Wednesday showed U.S. consumer prices climbed 2.3 percent in March compared with a year ago. They rose just 1.1 percent when food and energy were excluded, the smallest increase in more than six years.

Bernanke said the risk of a renewed contraction was "not negligible" but the threat had receded in recent months.

He said growth was still weighed down by weakness in the construction sector and battered state and city budgets.

The chairman cited encouraging signs layoffs are slowing and employment "has turned up."

Overall, his comments still suggested caution about the recovery, despite data on Wednesday showing a sharp 1.6 percent increase in March retail sales.

"It implies he won't be tinkering with short-term interest rates in the near future," said Jeffrey Friedman, senior market strategist at Lind-Waldock in Chicago.

In response to the most severe financial crisis since the Great Depression, the Fed cut interest rates essentially to zero and undertook a host of unconventional emergency measures to keep credit markets flowing.

Despite those actions, the economy suffered its worst recession in more than 70 years. Things have been getting better recently, with U.S. gross domestic product surging 5.6 percent in the fourth quarter.

Legislators asked a lot of questions about China's exchange rate, an issue that has reemerged as a major talking point in Washington in the run-up to next week's G-20 meeting.

Asked whether the yuan, which many analysts see as undervalued, helped cause the worldwide recession, Bernanke said it was one of many factors.

"I think it would be good for the Chinese to allow more flexibility in their exchange rate. It would give them more autonomy in their monetary policy so they could address inflation and bubbles within their own economy," he said.

Other lawmakers focused on the issue of consumer protection, an area where the Fed is generally seen as having fallen short ahead of the crisis.

Bernanke admitted some mistakes, suggesting he was not completely set on having those kinds of supervisory duties fall within the central bank's jurisdiction.

"I can understand why some advocates would want to have a purely independent agency," he said.

"While we have acknowledged being late on these issues, I do believe we should receive credit for a much better performance in recent years."

© 2014 Thomson/Reuters. All rights reserved.

  Comment  |
   Contact  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Dick Morris: Democrats Conspiring to Rig Electoral College, Law Passed in 9 States So Far

Tuesday, 15 Apr 2014 09:26 AM

A plan, now stealthily making its way through state legislatures with astonishing speed, would junk the Electoral Colleg . . .

Dodd-Frank Act Has Not Reformed Wall Street

Tuesday, 09 Aug 2011 14:53 PM

July 21 marked the anniversary of the passing of the Dodd Frank Wall Street Reform and Consumer Protection act. Unfortun . . .

Obama's Legacy: Stagflation

Friday, 04 Mar 2011 16:49 PM

Obama's failure to support America's allies in the Middle East and his dithering endorsement of chaos in the region will . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved