Wednesday , 13 November 2019

HIGHLIGHTS-Bernanke testifies on U.S. economic outlook

Oct 4 (Reuters)

 
The following are highlights from a congressional Joint Economic Committee hearing on Tuesday with Federal Reserve Chairman Ben Bernanke testifying on the economic outlook.

> For a story on Bernanke’s testimony,

> For a text of Bernanke’s prepared testimony

> For other stories on Fed policy

BERNANKE ON FED READINESS

“The Committee will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability.”

BERNANKE ON LIMITS TO MONETARY POLICY

“Monetary policy can be a powerful tool, but it is not a panacea for the problems currently faced by the U.S. economy. Fostering healthy growth and job creation is a shared responsibility of all economic policymakers, in close cooperation with the private sector. Fiscal policy is of critical importance, as I have noted today, but a wide range of other policies–pertaining to labor markets, housing, trade, taxation, and regulation, for example–also have important roles to play.”

BERNANKE ON FISCAL CHALLENGES

“One crucial objective is to achieve long-run fiscal sustainability. The federal budget is clearly not on a sustainable path at present. … A second important objective is to avoid fiscal actions that could impede the ongoing economic recovery. These first two objectives are certainly not incompatible, as putting in place a credible plan for reducing future deficits over the longer term does not preclude attending to the implications of fiscal choices for the recovery in the near term. Third, fiscal policy should aim to promote long-term growth and economic opportunity.

BERNANKE ON THE RECOVERY:

“It is clear that, overall, the recovery from the crisis has been much less robust than we had hoped. Recent revisions of government economic data show the recession as having been even deeper, and the recovery weaker, than previously estimated; indeed, by the second quarter of this year–the latest quarter for which official estimates are available–aggregate output in the United States still had not returned to the level that it had attained before the crisis. Slow economic growth has in turn led to slow rates of increase in jobs and household incomes.”

BERNANKE ON FACTORS LIMITING GROWTH:

“However, the incoming data suggest that other, more persistent factors also continue to restrain the pace of recovery. … Consumer behavior has both reflected and contributed to the slow pace of recovery. Households have been very cautious in their spending decisions, as declines in house prices and in the values of financial assets have reduced household wealth, and many families continue to struggle with high debt burdens or reduced access to credit. Probably the most significant factor depressing consumer confidence, however, has been the poor performance of the job market.”

BERNANKE ON FINANCIAL STRESS:

“Credit remains tight for many households, small businesses, and residential and commercial builders, in part because weaker balance sheets and income prospects have increased the perceived credit risk of many potential borrowers. We have also recently seen bouts of elevated volatility and risk aversion in financial markets, partly in reaction to fiscal concerns both here and abroad. Domestically, the controversy during the summer regarding the raising of the federal debt ceiling and the downgrade of the U.S. long-term credit rating by one of the major rating agencies contributed to the financial turbulence that occurred around that time. Outside the United States, concerns about sovereign debt in Greece and other euro-zone countries, as well as about the sovereign debt exposures of the European banking system, have been a significant source of stress in global financial markets.”

BERNANKE ON FISCAL POLICY:

“One crucial objective is to achieve long-run fiscal sustainability. The federal budget is clearly not on a sustainable path at present. The Joint Select Committee on Deficit Reduction, formed as part of the Budget Control Act, is charged with achieving $1.5 trillion in additional deficit reduction over the next 10 years on top of the spending caps enacted this summer. Accomplishing that goal would be a substantial step; however, more will be needed to achieve fiscal sustainability.”

“A second important objective is to avoid fiscal actions that could impede the ongoing economic recovery.”

BERNANKE ON INFLATION:

“As the FOMC anticipated, however, inflation has begun to moderate as these transitory influences wane. In particular, the prices of oil and many other commodities have either leveled off or have come down from their highs, and the step-up in automobile production has started to reduce pressures on the prices of cars and light trucks. Importantly, the higher rate of inflation experienced so far this year does not appear to have become ingrained in the economy.”

About Reza File

To contact the editor responsible for this story : Reza Aswin at PT. ABC Future Indonesia email : rz_aswin@yahoo.com

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