Friday, October 28, 2011
U.S. recovery: Bernanke cautiously optimistic
Federal Reserve Chairman Ben Bernanke knows when to respond to market expectations — and when not to. Although speculations were rife this week that he might announce a further round of quantitative easing in a major speech on Friday, Mr. Bernanke disappointed observers did not outline any new expansionary monetary policy measures that the Fed might adopt.
The sober speech at an annual economic conference in Jackson Hole, Wyoming, reflected his cautious optimism on economic growth in the United States, which, Mr. Bernanke however warned, “has been much less robust than we had hoped.” He also expressed concern on the question of stubbornly high unemployment levels, noting that the “extraordinarily high level of long-term unemployment,” had led to a situation where nearly half of the unemployed had been out of work for more than six months.
‘Unusual circumstances'
While Mr. Bernanake noted that such “unusual circumstances” warranted policies that promoted a stronger recovery in the near-term, he shied away from announcing any unconventional policies such as an additional large-scale bond purchase.
Instead the Chairman focused on an area of economic policy that is beyond the Fed itself — fiscal policy — and spoke with surprising candour about the recent debt ceiling battle in the U.S. Congress and the White House. Implicitly criticising lawmakers for allowing a crisis to foment around the debt limit negotiations, which ultimately led to a downgrade of the U.S.' credit rating by S&P earlier this month Mr. Bernanke said, “There seems little doubt that [these developments] have hurt household and business confidence and that they pose ongoing risks to growth.” Mr. Bernanke also sought to underscore the link between the urgent need for fiscal reform and the imperative to steer the U.S. economy back to a high-growth path. Pointing out that the issue of fiscal sustainability had to be quickly addressed he cautioned that fiscal policymakers “should not, as a consequence, disregard the fragility of the current economic recovery.”
Instead, he said, they ought to promote stronger economic performance through the design of tax policies and spending programs, a hint that the Fed preferred to see balanced approach of tax hikes as well as spending cuts in getting the U.S back to fiscal health.
The sober speech at an annual economic conference in Jackson Hole, Wyoming, reflected his cautious optimism on economic growth in the United States, which, Mr. Bernanke however warned, “has been much less robust than we had hoped.” He also expressed concern on the question of stubbornly high unemployment levels, noting that the “extraordinarily high level of long-term unemployment,” had led to a situation where nearly half of the unemployed had been out of work for more than six months.
‘Unusual circumstances'
While Mr. Bernanake noted that such “unusual circumstances” warranted policies that promoted a stronger recovery in the near-term, he shied away from announcing any unconventional policies such as an additional large-scale bond purchase.
Instead the Chairman focused on an area of economic policy that is beyond the Fed itself — fiscal policy — and spoke with surprising candour about the recent debt ceiling battle in the U.S. Congress and the White House. Implicitly criticising lawmakers for allowing a crisis to foment around the debt limit negotiations, which ultimately led to a downgrade of the U.S.' credit rating by S&P earlier this month Mr. Bernanke said, “There seems little doubt that [these developments] have hurt household and business confidence and that they pose ongoing risks to growth.” Mr. Bernanke also sought to underscore the link between the urgent need for fiscal reform and the imperative to steer the U.S. economy back to a high-growth path. Pointing out that the issue of fiscal sustainability had to be quickly addressed he cautioned that fiscal policymakers “should not, as a consequence, disregard the fragility of the current economic recovery.”
Instead, he said, they ought to promote stronger economic performance through the design of tax policies and spending programs, a hint that the Fed preferred to see balanced approach of tax hikes as well as spending cuts in getting the U.S back to fiscal health.
Labels: Bernanke, S and P downgrade, U.S. economy
Saturday, August 28, 2010
U.S. economy posts lower growth in second quarter
From The Hindu
Compounding heightened insecurity on the prospect of a double-dip recession, the U.S. Commerce Department on Friday released a gloomy second-quarter report that showed economic growth had remained flat at 1.6 per cent.
The rate was significantly lower than the 2.4 per cent that a majority of surveyed economists had expected, and combined with an unemployment rate stuck stubbornly at 9.5 per cent, it has cast serious doubts upon the prospects for a sustained recovery under the Obama administration.
However, in a speech on Friday, Ben Bernanke, Chairman of the Federal Reserve, said that he expected the economy “to continue to expand in the second-half of this year, albeit at a relatively modest pace.”
Mr. Bernanke added that the Fed stood ready to undertake policy measures to support what growth was there, noting that additional purchases of longer-term securities, should the Federal Open Market Committee choose to undertake them, would be effective in further easing financial conditions.
The Fed Chairman also underscored that the employment situation had not shown adequate improvement. He noted that data on the labour market remained “disappointing,” and private sector employment grew only sluggishly.
He further said that the small decline observed in the unemployment rate was attributable “more to reduced labour force participation than to job creation, and initial claims for unemployment insurance remain high.”
Emphasising the flexible approach of the Fed to deal with a variety of possible economic outcomes he said that the central bank was already supporting the economic recovery by maintaining an “extraordinarily accommodative monetary policy, using multiple tools.” Should further action prove necessary, Mr. Bernanke added, policy options were available to provide additional stimulus.
Compounding heightened insecurity on the prospect of a double-dip recession, the U.S. Commerce Department on Friday released a gloomy second-quarter report that showed economic growth had remained flat at 1.6 per cent.
The rate was significantly lower than the 2.4 per cent that a majority of surveyed economists had expected, and combined with an unemployment rate stuck stubbornly at 9.5 per cent, it has cast serious doubts upon the prospects for a sustained recovery under the Obama administration.
However, in a speech on Friday, Ben Bernanke, Chairman of the Federal Reserve, said that he expected the economy “to continue to expand in the second-half of this year, albeit at a relatively modest pace.”
Mr. Bernanke added that the Fed stood ready to undertake policy measures to support what growth was there, noting that additional purchases of longer-term securities, should the Federal Open Market Committee choose to undertake them, would be effective in further easing financial conditions.
The Fed Chairman also underscored that the employment situation had not shown adequate improvement. He noted that data on the labour market remained “disappointing,” and private sector employment grew only sluggishly.
He further said that the small decline observed in the unemployment rate was attributable “more to reduced labour force participation than to job creation, and initial claims for unemployment insurance remain high.”
Emphasising the flexible approach of the Fed to deal with a variety of possible economic outcomes he said that the central bank was already supporting the economic recovery by maintaining an “extraordinarily accommodative monetary policy, using multiple tools.” Should further action prove necessary, Mr. Bernanke added, policy options were available to provide additional stimulus.
Labels: Bernanke, U.S. economy, U.S. Federal Reserve
Subscribe to Posts [Atom]
