Bernanke says the Fed will act to bolster US economy
FEDERAL Reserve chairman Ben Bernanke said the central bank stands ready to take additional steps to boost US growth and cautioned lawmakers against budget moves that would harm a "sluggish" recovery in an economy "close to faltering".
The Fed "will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability", Mr Bernanke said yesterday, in testimony to Congress's Joint Economic Committee in Washington.
The remarks signal that Mr Bernanke may not be finished after attempts in August and September to strengthen record monetary stimulus with unconventional tools. The central bank's near-zero benchmark interest rate and $2.3 trillion of housing and government-debt purchases since 2008 have failed to produce self-sustaining growth in the economy.
Lawmakers on the separate bipartisan congressional supercommittee charged with seeking $1.5 trillion in deficit reduction by November 23 would take a "substantial step" by accomplishing that goal, Mr Bernanke said.
At the same time, "more will be needed to achieve fiscal sustainability," he added.
"A second important objective is to avoid fiscal actions that could impede the ongoing economic recovery," Mr Bernanke said. "Putting in place a credible plan for reducing future deficits over the longer term does not preclude attending to the implications of fiscal choices for the recovery in the near term," he added, without being more specific.
Mr Bernanke said the economy was growing more slowly than the Federal Reserve had expected and that the biggest factor depressing consumer confidence was poor job growth. "We need to make sure that the recovery continues and doesn't drop back and that the unemployment rate continues to fall downward."
He also told the Joint Economic Committee that lawmakers faced a delicate challenge: they must avoid making deep spending cuts that could impede the recovery.
He said the US banking system had manageable exposure to European nations buffeted by the sovereign debt crisis.
"We have looked very carefully at bank exposures both to foreign sovereigns and to foreign banks. The exposures of US banks to the most troubled sovereigns -- Portugal, Ireland and Greece -- is quite minimal. So the direct exposures there are not large."
Mr Bernanke said questions about the solvency of European nations and the stability of banks had created an "enormous amount of uncertainty" in financial markets, and volatility was one reason why the US economic recovery had been slower than projected this year. (AP)