Unemployment still too high despite pick-up, warns Fed chief Bernanke
Published 10/02/2011 | 05:00
US unemployment is too high despite an improving economy, Federal Reserve chairman Ben Bernanke told Congress yesterday, suggesting the central bank has no intention of cutting short a $600bn bond-buying programme
In testimony to the House of Representatives Budget Committee that largely echoed a speech he delivered last week, the Fed chief also warned about the dangers of unsustainable budget deficits.
Acknowledging a recent pick-up in the economy, Mr Bernanke said a sharp drop in the jobless rate to 9pc in January from 9.8pc in November, the biggest two-month decline since 1958, was "grounds for optimism".
However, he noted hiring is still anaemic.
"The job market has improved only slowly," he said, noting the economy had only made up just above one million of the more than eight million jobs lost during the deepest recession in generations.
"This gain was barely sufficient to accommodate the inflow of recent graduates and other new entrants into the labour force and, therefore, not enough to significantly erode the wide margin of slack that remains in our labour market," he added.
In November, the Fed launched a plan to buy $600bn in government debt to keep a lid on long-term borrowing costs and support a fragile economic rebound.
That programme drew ire from many policy-makers in emerging markets, who accused the United States of unfairly driving down the value of the US dollar to boost exports.
At home, many Republican lawmakers attacked it as potentially sowing the seeds of inflation.
Mr Bernanke said inflation remains quite low in the United States, a tough message to deliver amid headlines of rising food and commodity costs across the globe.
He also said expectations of future inflation had remained "stable", suggesting little worry an inflationary psychology was building despite rising gasoline costs.
"Inflation is expected to persist below the levels that Federal Reserve policymakers have judged to be consistent" with their mandate, the Fed chief repeated.