Federal Reserve Chairman Ben Bernanke remained cautious about the pace of the US economic recovery Wednesday, pointing to continued weakness in the construction sector.
REUTERS - The U.S. economy is still being weighed down by weakness in the construction sector and battered state and city budgets, Federal Reserve Chairman Ben Bernanke said on Wednesday.
Bernanke focused mostly on the barriers to continued economic growth in the prepared text of his congressional testimony, which did not directly reference the near-term outlook for benchmark interest rates or the U.S. central bank’s vow to keep them really low for an “extended period.”
“Significant restraints on the pace of the recovery remain, including weakness in both residential and nonresidential construction and the poor fiscal condition of many states and local governments,” Bernanke told the Joint Economic Committee in prepared remarks.
Bernanke did cite encouraging signs that layoffs are slowing and employment “has turned up.”
But overall, his comments still suggested some cautiousness about the recovery, despite data on Wednesday showing a sharp 1.6 percent increase in March retail sales.
“Further economic expansion will depend on continued growth in private final demand,” Bernanke said.
He said inflation figures remain subdued, and long-term inflation expectations remain contained. A government report on Wednesday showed U.S. consumer prices climbed 2.3 percent in March compared to a year ago, but rose just 1.1 percent when food and energy were excluded, the lowest increase in more than 6 years.
Investors hoping to dissect the chairman’s testimony for clues about the near-term interest rate outlook were disappointed. With no discussion of the issue in the prepared testimony, at the very least they would have to wait until the question and answer session.
Bernanke did not refer to the matter directly despite rampant talk in financial markets about whether or not the Fed was trying to water down its pledge to keep rates near rock bottom for an extended period.
In response to the most severe financial crisis since the Great Depression, the Fed cut interest rates essentially to zero and undertook a host of unconventional emergency measures to keep crippled credit markets flowing.
Despite those actions, the economy suffered its worst recession in more than 70 years, though things have been getting better recently. U.S. gross domestic product surged 5.6 percent in the fourth quarter as firms rebuilt depleted inventories.
Still, Bernanke said the unemployment picture presented a significant challenge, particularly given the high rate of long-term joblessness.
“A significant amount of time will be required to restore the 8-1/2 million jobs that were lost during the past two years,” he said.
Date created : 2010-04-14