15 October 2010
Federal Reserve Head Discusses Policies to Promote Jobs, Recovery
Washington — Sustained expansion of the U.S. economy must ultimately be driven by growth in consumer spending, business and residential investments, and exports, says Federal Reserve Chairman Benjamin Bernanke.
“Overall economic growth has been proceeding at a pace that is less vigorous than we would like,” Bernanke said at an October 15 economic conference at the Federal Reserve Bank of Boston. His remarks were being closely followed by financial markets in the United States and abroad for signs of what actions the Federal Reserve may take to shore up the economic recovery and help sustain the expansion.
Bernanke told economists that the U.S. central bank remains committed to pursuing policies that promote maximum employment and price stability. Unemployment in the United States is currently at 9.6 percent and has changed little for most of the year.
High unemployment has held consumers back from spending because unemployment tends to hold down wages and raises uncertainty among workers about their job security. Since June, the private sector has added an average of about 85,000 workers a month, which is “not enough to bring the unemployment rate down significantly,” Bernanke said.
The Federal Reserve has a dual mission: keep inflation in check and maximize employment.
The United States and most major global economies entered a recession in December 2007 and began recovery by July 2009, following a series of “forceful actions” by central banks and other policymakers around the world, Bernanke said. These measures, though not always popular or well understood, helped to stabilize the global financial system and restore normal function to key financial markets, he added.
The 2007–2009 recession is regarded as the most severe since the Great Depression of the 1930s. Based on the analysis by the National Bureau of Economic Research, which officially charts the business cycle, it was the longest on record since the end of World War II in 1945. Recessions and expansions are based on a complex array of economic indicators that include employment, gross domestic product, income, industrial production, wholesale and retail sales and export trade data.
“Although the pace of recovery has slowed in recent months and is likely to continue to be fairly modest in the near term, the preconditions for a pickup in growth next year remain in place,” Bernanke told the economists.
The contribution to the economy made by two federal stimulus measures is expected to decline steadily over coming quarters, but not so quickly that they derail the economy, Bernanke said. In February 2009, President Obama signed into law a $787 billion economic stimulus plan to shore up the economy and stabilize the U.S. financial sector. It followed an October 2008 $700 billion economic bailout package by then President George W. Bush that aimed to support the nation’s financial sector in the face of a rapidly worsening recession.
Bernanke also said that continued solid expansion among the economies of U.S. trading partners should help to support foreign sales and growth in the United States.
Federal Reserve policymakers are evaluating measures to buy additional long-term U.S. Treasury securities intended to lower long-term interest rates that would stimulate buying and spending. The previous program by the Federal Reserve in which it bought $1.7 trillion in mortgage securities and treasury securities helped to stimulate economic recovery.
But Bernanke warned that the Federal Open Market Committee (FOMC) — the policymaking committee of the Federal Reserve — would have to weigh the benefits and costs of such measures before launching any initiative. The committee meets again November 2–3 in Washington.
“The FOMC will take account of the potential costs and risks of nonconventional policies, and, as always, the committee’s actions are contingent on incoming information about the economic outlook and financial conditions,” Bernanke added.
(This is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://www.america.gov)
