Unemployment, inflation still a problem

Federal
Reserve Chairman Ben Bernanke has  expressed more confidence that U.S. economic
growth is on firmer footing but gave no indication the Fed is about to take its
foot off the gas.

In
prepared remarks to the House Budget Committee, Mr. Bernanke said high
unemployment and low inflation called for continued support from the Fed.

He
also issued a new warning to lawmakers about the dangers of the country’s
growing budget deficit.

It
was the Fed chairman’s first appearance before a House panel since Republicans
took control of the chamber in January.

Mr.
Bernanke said strong declines in the unemployment rate over the past two
months, coupled with improvements in indicators of job openings and firms’
hiring plans, provide some grounds for optimism on the jobs front.

Even
so, with employers still reluctant to ramp up hiring, it will be several years
before the unemployment rate has returned to a more normal level, he added.

“Until
we see a sustained period of stronger job creation, we cannot consider the
recovery to be truly established,” Mr. Bernanke said.

The
U.S. economy added few jobs in January as major snowstorms prevented people
from working, but payrolls should bounce back in February barring more severe
weather.

The
unemployment rate fell to 9.0 per cent last month, the lowest level in almost
two years.

Because
of low inflation and high joblessness, the Fed plans to buy $600 billion worth
of U.S. Treasury debt by the end of June.

With
the U.S. economy growing more rapidly and some commodity prices surging, Fed
officials could soon debate when to start pulling back their easy-money
policies.

 Mr. Bernanke repeated the central bank has all
the tools to exit, but gave no indication that a rate increase was imminent.

Comments are closed.