Federal Reserve Chairman Ben Bernanke said Tuesday that there have been tentative signs of a slowing in the steep economic decline, offering hope that the worst of the recession may be drawing to a close. Speaking in Atlanta at Morehouse College, Bernanke also addressed the Fed's continued commitment to prices stability, although he noted that inflation is likely to remain exceptionally low for some time.
Recently we have seen tentative signs that the sharp decline in economic activity may be slowing, Bernanke said. He cited statistics in home sales, homebuilding, and consumer spending, with sales of new motor vehicles showing some signs of leveling out.
A leveling out of economic activity is the first step toward recovery, Bernanke added.
Bernanke's remarks reflected those of President Barack Obama, who also spoke Tuesday regarding the hopeful signs in the economy.
Obama, offered hopeful remarks at Georgetown University in Washington, and praised all of the recent actions by his administration, including the $787 billion recovery act, the plan to capitalize and stabilize the banking industry, the plan for the auto industry, and international cooperation at the Group of 20 Summit in London. The president noted the progress of these actions, reiterating comments made Monday.
Taken together, these actions are starting to generate signs of economic progress, Obama said.
He noted that public sector institutions like schools and police departments have canceled some layoffs. In addition, the housing market has benefited from historically low mortgage rates, Obama added.
On a smaller scale, auto and student loans have started to unfreeze and small businesses are seeing a jump in loan activity for the first time in months, Obama said.
However, while there are glimmers of hope on the horizon, there are still challenges facing the economy and they will linger through the rest of the year, Obama warned.
2009 will continue to be a difficult year for America's economy, he said. The severity of this recession will cause more job loss, more foreclosures, and more pain before it ends.
In addition, despite recent gains in the beleaguered stock market, Obama said that there would be ups and downs before a full stabilization takes place.
Despite the optimism of both men, disappointing retail sales sent stocks lower Tuesday, with the Dow down over 100 points late in the trading day.
In terms of price stability, Bernanke stressed that the Fed is still focusing on the risk of inflation and remain committed to unloading the Fed's balance sheet in a timely fashion.
I can assure you that monetary policy-makers are fully committed to acting as needed to withdraw on a timely basis the extraordinary support now being provided to the economy, and we are confidence in our ability to do so, he said.
The Fed treats its obligation to ensure price stability extremely seriously, Bernanke added.
However, in the near term inflation is likely to remain subdued, the Fed Chairman stressed.
Right now, because of the weakness in economic conditions here and around the world, inflation has been running less than that, and our best forecast is that inflation will remain quite low for some time, he said.
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