Bernanke Cites Risks; Noncommital on Action
Federal Reserve Chairman Ben Bernanke cited significant risks to the U.S. economic recovery but stopped short of signaling Fed action to combat them during testimony on Capitol Hill Thursday (June 7), according to an Associated Press report.
When asked whether the Fed is planning to take more measures to boost growth, Bernanke said he and his colleagues “are still working” on that question ahead of their June 19-20 meeting. The main question they need to answer, he said, is whether the economy will be strong enough to make material progress on bringing down unemployment.
“We have a number of different options” for action if they decide to move, he told Congress’s Joint Economic Committee. “At this point I really can’t say anything is off the table.”
In his prepared testimony, he said the risks to the recovery included the financial turmoil in Europe and uncertain U.S. fiscal policy, and he said the Fed remained “prepared to take action” to protect the U.S. economy and financial system if stresses escalate.
In all, Bernanke’s comments were more restrained than those offered this week by some other Fed officials, including remarks Wednesday evening by Fed Vice Chairwoman Janet Yellen, who laid out detailed arguments for why the Fed might take new actions to bolster the economy and protect it from risks to growth. She said risks to the economic outlook may require the Federal Reserve to take additional steps to “insure against adverse shocks.”
Other Fed officials also have spoken openly about the possibility of taking further action in the wake of a stream of disappointing economic data, including last week’s disappointing May jobs report. They will update their forecasts for economic growth at the coming meeting and Bernanke will hold a press conference afterward.
The U.S. economy looks poised to continue growing at a “moderate” pace this year, the Fed chief said at the hearing. He pointed to headwinds constraining the recovery, including a weak housing market and concerns about the health of the European banking system. And he warned that the recovery may now be at a point where faster economic growth is needed to produce significant improvements in the job market.