Tags: federal reserve | ben bernanke | economy | progress

Former Fed Chief Bernanke Sees 'Somewhat Stronger' US Economy

Tuesday, 04 Mar 2014 07:05 AM

The U.S. economy is seeing signs of progress, led in part by a housing recovery, former Federal Reserve Chairman Ben S. Bernanke said in his first public remarks since leaving the central bank in January.

Bernanke guided the economy through the financial crisis that brought down Lehman Brothers Holdings Inc. and the longest recession since the Great Depression — events that he characterized as “very, very dark hours.”

He responded with an unprecedented stimulus campaign, lowering the main interest rate, the federal-funds rate, to zero in December of 2008 and introducing an era of bond buying known as quantitative easing.

The jobless rate climbed as high as 10 percent in October 2009, and with the economy slow to heal, Bernanke initiated a second and third round of bond purchases, which have expanded the Fed’s balance sheet to a record $4.16 trillion.

“There are some signs that recoveries are picking up” in industrial economies, Bernanke said in Abu Dhabi. “You’re seeing some strength in Japan with Abenomics, you’re seeing a somewhat stronger U.S. economy.”

“Europe is still far from where it needs to be but it’s been improving, it’s been strengthening,” he said.

Household Wealth

In December, during his second-to-last meeting of the policymaking Federal Open Market Committee, Bernanke began to wind down his stimulus campaign, slowing the pace of bond purchases to $75 billion a month from $85 billion, and charting a course of further “measured” reductions at each Fed meeting. In January, the committee cut the pace of purchases again, this time to $65 billion a month.

U.S. household wealth has recovered from the crisis, Bernanke said.

Janet Yellen, who served as Fed vice chair under Bernanke, became leader of the Fed in February. In testimony before Congress last month she said she expects “a great deal of continuity” as she takes over where Bernanke left off.

As Bernanke departed, the Fed faced the challenge of ascertaining how much of recent economic weakness is because of unusually harsh winter weather.

Labor Department data showed weaker-than-forecast payroll growth for two consecutive months. Sales at U.S. retailers declined in January by the most since June 2012 and housing starts slumped by the most in almost three years, according to a Commerce Department report.

“Unseasonably cold weather has played some role,” Yellen said in response to a question from the Senate Banking Committee Feb. 27.

‘Very Hard’ Adjustment

“What we need to do, and will be doing in the weeks ahead, is to try to get a firmer handle on exactly how much of that set of soft data can be explained by weather and what portion, if any, is due to softer outlook,” she said.

The address marks Bernanke’s public debut after he concluded his eight years at the head of the central bank on Jan. 31. In his post-chairmanship, Bernanke is taking lecture opportunities around the world — he will speak Wednesday in Johannesburg and March 7 in Houston — and working on a memoir of his time at the Fed.

He said that it was “very hard” for him to adjust to a world where his words were dissected. “It’s one of the reasons I’m looking” forward to my new life, Bernanke said.

Commenting on geopolitical risks, Bernanke said the outcome of Iran’s nuclear talks could be key for the world economy. Iran and world powers last month set a schedule for five months of negotiations in a race to agree on a definitive nuclear accord before their interim deal expires in July.

“The outcome of that could lead in very different directions,” he said


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Economy
The U.S. economy is seeing signs of progress, led in part by a housing recovery, former Federal Reserve Chairman Ben S. Bernanke said in his first public remarks since leaving the central bank in January.
federal reserve,ben bernanke,economy,progress
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2014-05-04
Tuesday, 04 Mar 2014 07:05 AM
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