Tuesday
Jul152008
Bernanke distinguishes the facts from the fear
The Senate Banking, Housing and Urban Affairs Committee held a full committee hearing on the Federal Reserve’s semiannual monetary policy report to Congress. Sen. Chris Dodd (D-Conn.) presided over the hearing and said that in considering the state of the U.S. economy, it is important to distinguish between fear and facts. Dodd explained that in the country’s markets today, in particular during the turmoil of recent days, far too many actions are being driven by fear, and are ignoring crucial facts. This neglect of the facts, Dodd said, has caused Americans to experience unprecedented hardship and uncertainties, and now more than ever, they need to know when things will start to turn around and when the country will get back on track.
Chairman of the Federal Reserve, Ben Bernanke, explained many of the significant challenges the U.S. economy and financial system have experienced thus far in 2008. Bernanke said that economic activity has advanced at a sluggish pace during the first half of the year, while inflation has remained elevated. Though the Federal Reserve and the Federal Open Market Committee (FOMC) have eased policies to counter weakness in economic growth and expanded some of the special liquidity programs and implemented additional facilities to support the functioning of financial markets and foster financial stability, the economy continues to face numerous difficulties, including ongoing strains in financial markets, declining house prices, a softening labor market, and rising prices of oil, food, and other commodities.
Bernanke explained that investors have recently become particularly concerned about the financial condition of the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. Because of this, the Treasury announced a legislative proposal to bolster their capital, access to liquidity, and regulatory oversight. Healthy economic growth depends on well-functioning markets, thus, Bernanke said, helping the financial markets to return to more normal functioning will continue to be a top priority of the Federal Reserve.
Looking at the economy overall, Bernanke said that it has continued to expand, but at a subdued pace. The unemployment rate has risen to 5-1/2 percent, activity continues to weaken in the housing sector, and the labor market has “softened.” Bernanke explained that inflation has remained high and seems likely to move temporarily higher in the near term, while the price of oil currently stands at about five times its level toward the beginning of this decade. This surge in oil prices has been driven mostly by strong growth in underlying demand and tight supply conditions in global oil markets; the world economy has expanded at its fastest pace in decades, leading to substantial increases in the demand for oil. Bernanke also said that the decline in the foreign exchange value of the dollar, along with financial speculation, have added to the increase in oil prices.
Bernanke finished by saying that the possibility of higher energy prices, tighter credit conditions, and a still-deeper contraction in housing markets all represent significant downside risks to the outlook for growth. On the other hand, upside risks to the inflation outlook have intensified lately, as the rising prices of energy and some other commodities have led to a sharp pickup in inflation and some measures of inflation expectations have moved higher. Bernanke said that given this high degree of uncertainty, monetary policy makers will need to carefully assess incoming information bearing on the outlook for both inflation and growth.
Chairman of the Federal Reserve, Ben Bernanke, explained many of the significant challenges the U.S. economy and financial system have experienced thus far in 2008. Bernanke said that economic activity has advanced at a sluggish pace during the first half of the year, while inflation has remained elevated. Though the Federal Reserve and the Federal Open Market Committee (FOMC) have eased policies to counter weakness in economic growth and expanded some of the special liquidity programs and implemented additional facilities to support the functioning of financial markets and foster financial stability, the economy continues to face numerous difficulties, including ongoing strains in financial markets, declining house prices, a softening labor market, and rising prices of oil, food, and other commodities.
Bernanke explained that investors have recently become particularly concerned about the financial condition of the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. Because of this, the Treasury announced a legislative proposal to bolster their capital, access to liquidity, and regulatory oversight. Healthy economic growth depends on well-functioning markets, thus, Bernanke said, helping the financial markets to return to more normal functioning will continue to be a top priority of the Federal Reserve.
Looking at the economy overall, Bernanke said that it has continued to expand, but at a subdued pace. The unemployment rate has risen to 5-1/2 percent, activity continues to weaken in the housing sector, and the labor market has “softened.” Bernanke explained that inflation has remained high and seems likely to move temporarily higher in the near term, while the price of oil currently stands at about five times its level toward the beginning of this decade. This surge in oil prices has been driven mostly by strong growth in underlying demand and tight supply conditions in global oil markets; the world economy has expanded at its fastest pace in decades, leading to substantial increases in the demand for oil. Bernanke also said that the decline in the foreign exchange value of the dollar, along with financial speculation, have added to the increase in oil prices.
Bernanke finished by saying that the possibility of higher energy prices, tighter credit conditions, and a still-deeper contraction in housing markets all represent significant downside risks to the outlook for growth. On the other hand, upside risks to the inflation outlook have intensified lately, as the rising prices of energy and some other commodities have led to a sharp pickup in inflation and some measures of inflation expectations have moved higher. Bernanke said that given this high degree of uncertainty, monetary policy makers will need to carefully assess incoming information bearing on the outlook for both inflation and growth.
Reader Comments (1)
Dear Sir or Madam.
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What market for fix price but ready forgot what happened going on to country and public . What communication back up Fed to Fed State t o State and Local to Local emergency that we need talking about first then we talking about processing Business management
thanks you