The U.S. economy will begin to turn up later this year provided the
financial sector continues to mend, although unemployment will remain
high for a while, Federal Reserve Chairman Ben Bernanke said on Tuesday.
In testimony prepared for delivery to a congressional committee,
Bernanke sounded more confident that a recovery was at hand than he had
in recent weeks.
He said the U.S. housing market may be bottoming after a three-year
slide, and pointed to tentative signs of a rebound in consumer
spending, which is the driving force behind the economy.
We continue to expect economic activity to bottom out, then to turn
up later this year, Bernanke said in the testimony to the Congress'
Joint Economic Committee.
However, he added that even after the recovery begins, the rate of
growth of real economic activity is likely to remain below its
longer-run potential for a while.
That will leave slack in the economy, keeping inflation low, which
in turn suggests that the central bank will keep interest rates low for
The Fed dropped benchmark overnight interest rates to near zero in
December. After a meeting on April 28-29, it repeated that it would
likely hold borrowing costs at an unusually low level for an extended
Bernanke mentioned the so-called stress tests regulators have been
conducting at the 19 largest U.S. banks, but he offered no insight into
Final results from the tests, aimed at determining whether the firms
have a big enough capital cushion to withstand a deeper downturn, are
expected to be released on Thursday.
He also said the Fed would soon release more details on the various lending programs it has launched to try to ease the credit crisis, including information on the number of borrowers and the collateral accepted.
While he stopped short of agreeing to name borrowers, as some
lawmakers have requested, he acknowledged that the central bank had a
responsibility to keep Congress and the public informed about its
lending programs and balance sheet.
That has become a contentious issue as the central bank has extended
massive amounts of loans to banks as well as other firms that have not
traditionally turned to the Fed in its role of lender of last resort.
I want to commend you for establishing greater transparency at the
Fed, Representative Carolyn Maloney, chairman of the Joint Economic
Committee, said in a statement.
To be sure, there are fewer 'secrets of the temple' today, but I
know you will appreciate that we must continue to work to strike a
better balance between institutional interests and the public's right
to know how their money is being spent, the New York Democrat said.