Business World

Sunday 17 December 2017

Rising wages to boost spending, says Fed chief

FEDERAL Reserve chairman Ben Bernanke said rising wages will probably spur US household spending in the next few quarters, even as "slow" job gains drag down consumer confidence.

"We have a considerable way to go to achieve a full recovery in our economy," Mr Bernanke said yesterday in a speech to lawmakers in South Carolina.

Still, "rising demand from households and businesses should help sustain growth", and consumer spending, which accounts for about 70pc of the economy, "seems likely to pick up in coming quarters".

Fed policy makers are now starting to consider how to bolster the recovery and reduce unemployment after a year of developing tools to remove record monetary stimulus. A report last week showed that the economy slowed to a 2.4pc annual rate in the second quarter, less than forecast, as a scarcity of jobs eroded consumer spending.

The economy "is now expanding at a moderate pace", Mr Bernanke said. "Notable restraints on the recovery persist." including housing, commercial real estate and the labour market, he said.

"We need to make sure that monetary policy continues to provide the support the economy needs until we begin to see sustained growth and particularly growth in jobs," Mr Bernanke said.

"That is what the Fed is doing. We are maintaining strong monetary policy support for the recovery."

The Fed chief devoted most of the speech to budget issues for state and local governments. States are cutting spending to tackle a combined $84bn of budget deficits.

The reductions were "weighing on economic activity", he added.

Irish Independent

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