Tags: fed | bernanke | False | Dawns

Former Fed Official Kroszner: Bernanke Should Worry About ‘False Dawns’

Friday, 23 Mar 2012 08:16 AM

Federal Reserve Chairman Ben Bernanke is right to keep on offering cautious assessments of the economy despite improving economic indicators and capital markets, says former Fed Governor Randall S. Kroszner.

Treasury yields have been rising, a sign investors are ready to stock up on equities and other investments that do well when the economy grows.

Headwinds still face recovery, Bernanke has said, including exposure to Europe, weak demand and still-high unemployment rates, and those problems could return despite present lulls, Kroszner points out.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

"I would agree with Chairman Bernanke that we don't want to start popping the champagne corks yet," Kroszner tells CNBC.

"We've seen some very important false dawns in the U.S. labor market....In early 2011, we started to see very strong job creation, more than 200,000 a month, for three months, then things fell again.”

Should the economy go another few months without unpleasant surprises, then the Fed should lower its guard a little and make more confident forecasts, Kroszner adds.

Bernanke, meanwhile, continues to remain cautious over the pace of recovery, insisting that conditions meriting low interest rates will likely stick around through 2014.

Consumer demand, which accounts for about 70 percent of total U.S. economic output, still remains weak.

"Right now, in terms of debt and consumption, we're still way low relative to the pattern before the crisis," Bernanke told students in the second of two lectures at The George Washington University, according to Reuters.

"We lack a source of demand to keep the economy growing."

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did



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2012-16-23
Friday, 23 Mar 2012 08:16 AM
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