Bernanke Gives Speech, Blames Japanese Tsunami For Obama Economy, Says It And Jobs Growth Will Pick Up After June
Jun 7, 2011 9 Comments ›› Pat Dollard
Bernanke blamed the sluggish outlook for the April-to-June quarter on the effects of the Japanese
earthquake. This is likely to dissipate in coming months, he said.
ATLANTA—The U.S. economy should pick up in the second half of 2011 despite recent signs of weakness, Federal Reserve Chairman Ben Bernanke said Tuesday, who noted the economy’s recovery remains “uneven.”
Mr. Bernanke, speaking to a group of international bankers in Atlanta, said the central bank’s policy to help stimulate the economy is still necessary, reiterating the expectation that interest rates will remain low for an “extended period.”
The Fed chief said while he expects economic growth to rebound in the second half of the year, he acknowledged that conditions, particularly in the labor market, remain troubled.
“The economic recovery appears to be continuing at a moderate pace, albeit at a rate that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed,” Mr. Bernanke said.
The government last Friday reported the unemployment rate had climbed to 9.1% in May and was not meeting expectations for job growth. Mr. Bernanke noted this potential “loss of momentum,” but said he expects job growth to improve as growth solidifies in the second half of the year. Still, he said the Fed would monitor the situation closely.
Mr. Bernanke, repeating prior statements, said recent bouts of inflation are transitory in nature, suggesting there is little evidence to suggest inflation is spreading beyond a few key areas or is becoming ingrained in the broader economy.
If energy and other commodity prices stabilize at or near their current levels, he said, “the upward impetus to overall price inflation will wane and the recent increase in inflation will prove transitory.” The recent decline in some commodity prices “may be an indication that such moderation is occurring,” he added.
The rise in key commodity prices, most notably gasoline, has led a number of U.S. policy makers to pivot their focus from the state of labor markets to the specter of inflation. Mr. Bernanke said long-term inflation expectations remain stable, but stressed that the Fed will take “whatever actions are necessary” to keep inflation under control.
He also used the speech to weigh into the continuing U.S. debate over the nation’s fiscal position and whether to cut spending immediately, as some lawmakers have suggested.
Mr. Bernanke said the aid to the economy provided by recent stimulus efforts is waning, and warned that any rapid consolidation of government spending could be “self-defeating” if it caused a stall in the recovery.
Instead, he repeated his call from policy makers to enact a “credible, long-term plan for fiscal consolidation” that would lead to spending cuts over a multiyear horizon.
“By taking decisions today that lead to fiscal consolidation over a longer horizon, policymakers can avoid a sudden fiscal contraction that could put the recovery at risk,” Mr. Bernanke said.
