Bernanke Sees 'Formidable Headwinds' for Economy, Tight Credit
Dec. 7 (Bloomberg) -- Federal Reserve Chairman Ben S.Bernanke said the U.S. economy faces “formidable headwinds,”including a weak labor market and tight credit that are likelyto produce a “moderate” pace of expansion.
“The economy confronts some formidable headwinds that seemlikely to keep the pace of expansion moderate,” Bernanke, 55,said today in the text of remarks to the Economic Club ofWashington. “Despite the general improvement in financialconditions, credit remains tight for many borrowers,” and thejob market “remains weak.”
Bernanke has led the most aggressive monetary stimulus inU.S. history, expanding the Fed’s balance sheet by $1 trillionand cutting the benchmark lending rate a year ago close to zero.The economy grew at a 2.8 percent annual rate in the thirdquarter, and a report last week showed unemployment fell to 10percent in November from 10.2 percent the previous month.
The Fed chairman said the U.S. central bank has the toolsand commitment to keep price increases in check, and thatinflation could subside further.
“Elevated unemployment and stable inflation expectationsshould keep inflation subdued, and indeed, inflation could movelower from here,” Bernanke said. “The Federal Reserve iscommitted to keeping inflation low and will be able to do so.”
‘Back From Brink’
The Fed chairman credited the U.S. central bank withpulling the economy “back from the brink,” and suggested thatgrowth is unlikely to be strong enough to lower unemployment ata fast pace. The speech was his first since his appearance at aSenate Banking Committee hearing last week on his nomination toa second term.
“We still have some way to go before we can be assuredthat the recovery will be self-sustaining,” the Fed Chairmansaid. “My best guess at this point is that we will continue tosee modest economic growth next year -- sufficient to bring downthe unemployment rate, but at a pace slower than we wouldlike.”
To contact the reporter on this story:Craig Torres in Washington at ctorres3@bloomberg.net: Shobhana Chandra in Washington at +1- schandra1@bloomberg.net.
Last Updated: December 7, 2009 12:38 ESTSource: Bloomberg
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