Bernanke: "We Cannot Consider the Recovery to be Truly Established"

June 7th, 2011
in econ_news

Econintersect:  Appearing before the International Monetary Conference  (Atlanta, Georgia), Federal Reserve Chairman Ben Bernanke summarized the economic situation:

  • the economic recovery is proceeding at a moderate pace
  • there are recent signs of reduced momentum
  • the labor market has been gradually improving but  remains far from normal with high unemployment
  • inflation has risen lately but should moderate.

Follow up:

There were some buts - such as Chairman Bernanke's inflation assumption was based on commodity prices stabilizing.   And the Chairman continued to state no change in the current monetary policy of low interest rates, and continued reinvestment of the quantitative easing securities on the Fed's balance sheets.  The Chairman refuted any notion that Federal Reserve policy had anything to do with commodity price inflation.

Chairman Bernanke's concluding remarks:

Although it is moving in the right direction, the economy is still producing at levels well below its potential; consequently, accommodative monetary policies are still needed. Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established. At the same time, the longer-run health of the economy requires that the Federal Reserve be vigilant in preserving its hard-won credibility for maintaining price stability. As I have explained, most FOMC participants currently see the recent increase in inflation as transitory and expect inflation to remain subdued in the medium term. Should that forecast prove wrong, however, and particularly if signs were to emerge that inflation was becoming more broadly based or that longer-term inflation expectations were becoming less well anchored, the Committee would respond as necessary. Under all circumstances, our policy actions will be guided by the objectives of supporting the recovery in output and employment while helping ensure that inflation, over time, is at levels consistent with the Federal Reserve's mandate.

The Federal Reserve Chairman covered many topics not included in this newsbrief, and the full text of his speech can be found here.

source: Federal Reserve


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