US Fed Chairman says US needs faster growth

The US economy needs to grow more quickly to bring down the unemployment rate further, US Federal Reserve Chairman Ben Bernanke said Monday, defending the central bank's policy of Zero + interest rates.

While he offered no clear signal that the Fed is keen to embark on a 3rd round of bond purchases (QE-3), Mr. Bernanke also made clear the Fed is in no rush to reverse course after responding aggressively to a deep recession.

Mr. Bernanke said the recent decline in the jobless rate, which dropped to 8.3% in February from 9.1% last Summer, was out of sync with the modest pace of economic growth.

To the extent that this reversal has been complete, further significant improvements in the unemployment rate will likely require a more rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies, Mr. Bernanke told the National Association for Business Economics.

US gross domestic product grew 3% in Q-4 of Y 2011, but is expected to have slowed to just below 2% in Q-1 of this year.

For all of Y 2011, it grew only 1.7%, which is too slow to drive the unemployment rate South IMO.

Mr. Bernanke said the recent drop in the jobless rate could reflect an effort by businesses to re-calibrate their payrolls after unusually heavy job cuts during the recession. If this is the case, he said, progress could stall.

But, reading between the lines, it sounds to me like he is, like Bill Gross Tweeted last night, hinting at renewed stimulus going forward.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.