The pace of economic decline has shown signs of gradual stabilization since April, but the labor market continues to weaken, said Federal Reserve Board Chairman Ben Bernanke during testimony before the House Committee on Financial Services Tuesday.
“Many of the improvements in financial conditions can be traced, in part, to policy actions taken by the Federal Reserve to encourage the flow of credit,” he said. Federal Reserve recovery programs such as the Term Asset-Backed Securities Loan Facility (TALF) and the Supervisory Capital Assessment Program (SCAP), both implemented this year, have restarted classes of small business and consumer securitization markets, increased investor confidence in the U.S. banking system, and raised equity in public markets.
Despite better conditions in financial markets and optimistic economic prospects, the unemployment rate continues to rise. “Although the unemployment rate is projected to peak at the end of this year, the projected declines in 2010 and 2011 would still leave unemployment well above FOMC participants’ views of the longer-run sustainable rate,” Bernanke said.
Further Federal Reserve and Reserve Bank projections indicate “subdued” inflation over the next two years, a slight increase in output at the end of this year, and a gradual recovery starting in 2010 with some acceleration in 2011.
To quell GOP committee members’ concerns about the Federal Reserve’s extensive intervention in monetary policy, Bernanke said, “The extraordinary policy measures we have taken in response to the financial crisis and the recession can be withdrawn in a smooth and timely manner as needed.”
Bernanke emphasized that the Federal Reserve is a non-partisan, independent organization and does not get involved in details of specific policy programs such as healthcare; however, he urged Congress to “think about the implications of the federal budget and make sure that we have a trajectory that will be sustainable for the medium term.”
Bernanke Says Economy Is Stabilizing, But Unemployment Rate Still Rising
The pace of economic decline has shown signs of gradual stabilization since April, but the labor market continues to weaken, said Federal Reserve Board Chairman Ben Bernanke during testimony before the House Committee on Financial Services Tuesday.
“Many of the improvements in financial conditions can be traced, in part, to policy actions taken by the Federal Reserve to encourage the flow of credit,” he said. Federal Reserve recovery programs such as the Term Asset-Backed Securities Loan Facility (TALF) and the Supervisory Capital Assessment Program (SCAP), both implemented this year, have restarted classes of small business and consumer securitization markets, increased investor confidence in the U.S. banking system, and raised equity in public markets.
Despite better conditions in financial markets and optimistic economic prospects, the unemployment rate continues to rise. “Although the unemployment rate is projected to peak at the end of this year, the projected declines in 2010 and 2011 would still leave unemployment well above FOMC participants’ views of the longer-run sustainable rate,” Bernanke said.
Further Federal Reserve and Reserve Bank projections indicate “subdued” inflation over the next two years, a slight increase in output at the end of this year, and a gradual recovery starting in 2010 with some acceleration in 2011.
To quell GOP committee members’ concerns about the Federal Reserve’s extensive intervention in monetary policy, Bernanke said, “The extraordinary policy measures we have taken in response to the financial crisis and the recession can be withdrawn in a smooth and timely manner as needed.”
Bernanke emphasized that the Federal Reserve is a non-partisan, independent organization and does not get involved in details of specific policy programs such as healthcare; however, he urged Congress to “think about the implications of the federal budget and make sure that we have a trajectory that will be sustainable for the medium term.”