Tags: US | Bernanke

Bernanke: Record-Low Rates Still Needed

Wednesday, 24 Feb 2010 10:31 AM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink

Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that record-low interest rates are still needed to ensure that the economic recovery will last and to help cushion the sting of high unemployment.

In his twice-a-year report to the House Financial Services Committee, Bernanke struck a confident tone that the recovery should endure. But he also sought to tamp down expectations.

The moderate economic growth the Fed expects will lead to only a slow decline in the nation's nearly double-digit unemployment rate, he said.

He offered no new clues about the timing of an interest rate increase. Most economists think it is months away. Bernanke said rates will need to stay at exceptionally low levels for an extended period "as the expansion matures."

As Bernanke began speaking, stocks started to pare their gains. The Dow Jones industrial average rose about 18 points. Earlier in the morning, it had risen about 68 points.

Bernanke is likely to face more pressure than usual from lawmakers in an election year. Their constituents are struggling economically, while bailed-out Wall Street banks are profitable again. Unemployment stands at 9.7 percent, home foreclosures are at record highs and individuals and businesses are having trouble getting loans.

The Fed chairman reiterated a pledge that the Fed will keep its main interest rate at an all-time low near zero for an "extended period." The target range for Fed's main rate, the federal funds rate, has been between zero and 0.25 percent since December 2008.

At the same time, Bernanke sought to stress that when the economy is on firmer footing and the Fed needs to reverse course and tighten credit for millions of Americans, he will do so.

Deciding when to boost rates will be the next big challenge facing Bernanke. Boosting rates too soon could derail the recovery. But waiting too long could trigger inflation and feed a speculative asset bubble. That, too, could threaten the economy, along with Americans' pocketbooks and nest eggs.

Bernanke would only say that "at some point," the Fed will need to move to tighten credit. When it does, Bernanke sketched out the Fed's strategy, first unveiled on Feb. 10, for doing so.

He said the Fed is likely to boost the rate it pays banks on money they leave at the Fed, which would mark a shift away from the funds rate, the Fed's main tool since the 1980s. A bump-up in the interest rate on bank reserves, though, would ripple though the economy in much the same way an increase in the funds rates does. Consumer and businesses borrowers would have to pay more for loans.

With financial conditions improving, the Fed has been able to wind down most of its special lending programs for banks and others set up during the crisis.

One key economic revival program that has lowered mortgage rates and bolstered the housing market is slated to end on March 31. The Fed is on track to complete buying $1.25 trillion worth of mortgage securities from Fannie Mae and Freddie Mac at that time, and another $175 billion worth of debt from them.

Bernanke continued to leave the door open to a possible extension of the program if the economy were to take a turn for the worse.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Share:
  Comment  |
   Contact Us  |
  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

New Chicago High School Won't Be Named After Obama

Thursday, 18 Sep 2014 21:23 PM

President Barack Obama's adopted hometown has nixed a plan to name a new high school after him. Chicago Mayor Rahm Emanu . . .

Arrest Made in Attempted Bombing of Rep. Cleaver's Office

Thursday, 18 Sep 2014 19:44 PM

Authorities in Kansas City, Mo. have charged a man after he allegedly threw molotov cocktails at Rep. Emanuel Cleaver's  . . .

Doctor: Global Response to Ebola Underway, but US Must Lead

Thursday, 18 Sep 2014 18:34 PM

Doctors and medical missionaries from around the world are already at work in west African countries besieged by Ebola,  . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

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