Federal Reserve Chairman Ben Bernanke Testifies Before Congress
Federal Reserve Chairman Ben Bernanke testified before congress today. His remarks were short and to the point. He basically reiterated the FOMC statements of last week, maintaining a cautious tone on the U.S. outlook that interest rates are likely to remain near zero until at least through late 2014.
He also noted that the US economy was still fragile and in a slow recovery and was not necessarily protected from Europe and that it was too soon to tell if the US would escape unscathed from the EU crisis.
Bernanke also noted that the Fed was in daily contact with their counterparts throughout the world monitoring the Europe and Global Crisis closely...
His testimony was as expected. The only notable change came in his brief statements after. The Chairman noted the central bank was considering additional monetary easing, but he offered no fresh hints of such plans in his testimony.
In late 2008, the Fed bought $2.3 trillion in bonds in a further effort to spur the economy. Many economists expect it will further expand its portfolio in the months ahead with another round of purchases.
His testimony also included comments regarding uncertain job prospects, along with tight mortgage credit conditions, continue to hold back the demand for housing. Although low interest rates on conventional mortgages and the drop in home prices in recent years have greatly improved the affordability of housing, both residential sales and construction remain depressed. A persistent excess supply of vacant homes, largely stemming from foreclosures, is keeping downward pressure on prices and limiting the demand for new construction.
The Fed outlook continued More recently, the pace of growth in business investment has slowed likely reflecting concerns about both the domestic outlook and developments in Europe. However, there are signs that these concerns are abating somewhat. If business confidence continues to improve, U.S. firms should be well positioned to increase both capital spending and hiring: Larger businesses are still able to obtain credit at historically low interest rates, and corporate balance sheets are strong. And, though many smaller businesses continue to face difficulties in obtaining credit, surveys indicate that credit conditions have begun to improve modestly for those firms as well.
Overall, Bernanke continued on the same note as the FOMC, reassuring that the US was in slow recovery and that the future would show improvement, but there could be bumps in the road, and the Fed was prepared to deal with any forthcoming problems. In all his statement and testimony had a positive outlook.
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