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Bernanke: US economy 'still far' from desired state

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(Globalpost/GlobalPost)

Federal Reserve Chairman Ben Bernanke said Monday that the US economy still has far to go to recover to an acceptable state of health.

"Today the economy is significantly stronger than it was four years ago, although conditions are clearly still far from where we would all like them to be," he said.

The statement, made in a speech on banking in Stone Mountain, Georgia, came as economists and investors seek signs on whether the US central bank is ready to tighten up its easy-money policy aimed at holding long-term interest rates down.

Since December the Fed has stuck to its ultra-low rates and its $85 billion per month QE or "quantitative easing" bond purchase program, despite economic indicators that led many to believe the economy is picking up speed.

Bernanke has consistently tied the tightening of monetary policy to a substantial improvement in unemployment, with the rate currently 7.6 percent, and his statement echoed comments made in previous months that he was not satisfied with the pace of recovery.

On Friday the Labor Department reported that just 88,000 new jobs were generated in March, the slowest growth in nine months and well below the level needed just to keep the current jobless rate steady, much less lower it.

At its regular policy meeting on March 20, the Fed said it remained concerned about the slow fall in joblessness and the slowing impact on the economy from tax increases launched on January 1 and deep government spending cuts instituted beginning March 1.

Despite some discussion in the FOMC's January meeting that the QE program is increasingly risky for monetary management, Bernanke said most FOMC members had agreed that the bond purchases "continue to provide meaningful support to economic growth and job creation."

"It's very, very important that we act to address unemployment," he said.

The minutes from the March meeting, to be released Wednesday, could give more insight into how unified or split the panel was in that conclusion.

A few FOMC members have voiced worries that, with the Fed's benchmark interest rate at 0-0.25 percent for over four years, and with other major central banks around the world pumping liquidity into their economies, that the risk of an uncontrolled burst of inflation is growing.

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http://www.globalpost.com/dispatch/news/afp/130408/bernanke-us-economy-still-far-desired-state-1