In a speech in Asia, Bernanke laid out some of his thoughts on the economy as on monetary policy.

Key highlights from his speech included:

  1. The recovery is moderate paced.
  2. There seems to be a good bit of momentum in consumer spending and investment. My best guess is we'll have a continued recovery [but] it won't feel terrific. In other words, there will not be a double-dip recession.
  3. Fed will raise interest rates before the economy returns to full employment.
  4. Unemployment rate will remain high for a while.
  5. Banking sector is not completely healthy and lenders remains cautious in providing credit.
  6. The ECB stabilization package is a lot of money and that policy makers are committed to avoiding default in Greece.

The speech helped markets rally slightly overnight, before markets retreated on worries over the UK debt and a slide in the EUR/CHF.

Fears of a double-dip recession in the globe and in the US rose in recent weeks as investors and economists worry about the spill-over effects of the Euro-zone sovereign debt situation which has fed declines in equity markets. The disappointing May non-farm payroll report also increased concerns that job creation in the private sector is slowing. On Wednesday, Bernanke will be in front of Congress testifying about the state of the economy and the budget.

Other Tidbits, Data, and Fed Comments from the US

While there was not much US data to start the week, we will end the week with some key releases, mainly the US retail sales report due on Friday. It will gauge the willingness of  consumers to spend during the month of May. Forecasts call for a small increase of 0.1%, following April's 0.4% rise.

- A small-business optimism index (published by National Federation of Independent Businesses) rose 1.6 points to 92.2 points in May, the highest reading since September of 2008. Firms were slightly more inclined to hire and to invest in new equipment, but low sales continue to be a problem. More firms lowered prices than raised them during the period.

- While the data is dated now, job openings at US companies and government agencies increased from seasonally adjusted 2.8 million in March to 3.1 million in April, the highest in 16 months, the Labor Department reported Tuesday. Again, since we have had a look at the May data, we have seen that private industry is reluctant to put on new workers in an environment of uncertainty, not to mention the loss of seasonal jobs as a result of the oil spill in the Gulf.

- A private measure of hiring intentions for the 3rd quarter, the Manpower Employment Outlook survey showed a seasonally adjusted net 6% of firms saying they intend to hire, up from 5% in the second quarter.

- Following Bernanke's comments, today, the President of the Chicago Fed Charles Evans said that the impact from the European sovereign debt crisis on the US economy may be relatively limited, though it will reduce the outlook for US GDP growth. While it may hit the US trade sector, the euro-zone only accounts for about 15% of US exports. On employment, his view is that US companies will have to begin hiring workers as they are unable to continue to increase output from their current workforce, something that we saw from the productivity data in the 1st quarter. In his remarks, Evans said that he is in no hurry to raise interest rates as inflation remains low and employment high.

The full text of his speech can be found here.