SALON

Tuesday, Jul 17, 2012 2:15 PM UTC

Bernanke offers no hints of imminent Fed action

By

Topics: From the Wires,

WASHINGTON (AP) — The U.S. economy has weakened and the Federal Reserve is ready to take further action to bolster growth if conditions don’t improve, Chairman Ben Bernanke told a congressional panel Tuesday. But Bernanke provided no clues about what steps the Fed might take or whether any action was imminent.

Investors were hoping Bernanke would signal that the Fed was ready to launch another round of bond purchases, which aim to drive down long-term interest rates and encourage more borrowing and spending.

Bernanke is delivering his mid-year report on the economy to the Senate Banking Committee. He’ll testify Wednesday before the House Financial Services Committee.

His report comes as job growth has slumped, manufacturing has weakened and consumers have grown more cautious about spending.

Bernanke acknowledged those developments in his testimony. He noted that the economy, after growing at an annual rate of 2.5 percent in the second half of 2011, slowed to roughly 2 percent in the first three months of this year and likely slowed further in the April-June period.

The economy will likely continue to expand moderately, he said. But the meager growth would slow further if Europe’s debt crisis worsens or if Congress doesn’t address an impending budget crisis before the end of the year.

“Although declines in energy prices are now providing some support to consumers’ purchasing power, households remain concerned about their employment and income prospects and their overall level of confidence remains relatively low,” Bernanke said in his testimony.

Even if the Fed announces another round of bond purchases, some economists question how much that would help. They note that mortgage rates and other key interest rates are already at record-low levels.

Bernanke has said that the Fed can only do so much to help the economy. In his testimony, he pointed to the Congressional Budget Office’s warning that the economy could suffer a shallow recession next year if Congress is unable to reach a budget deal that would avert steep tax hikes and across-the-board spending cuts.

“The most effective way that the Congress could help to support the economy right now would be to work to address the nation’s fiscal challenges in a way that takes into account both the need for long-run stability and the fragility of the recovery,” Bernanke said in his testimony. “Doing so earlier rather than later would help reduce uncertainty and boost household and business confidence.”

The economy was already sputtering when the Fed’s policymaking committee last met June 19-20. At that meeting, the Fed decided to extend a program that shifts its bond portfolio to try to lower long-term interest rates. The Fed also reiterated its plan to keep its key short-term interest rate near zero until at least late 2014.

Minutes of the June meeting show that Fed officials were open to taking further action — but were divided over whether the economy needs help now.

Since then, the government has reported that job growth slowed sharply in the April-June quarter — to 75,000 a month from 226,000 a month from January through March. The unemployment rate stayed at 8.2 percent in last month.

Former Fed official Roberto Perli, managing director at the research firm International Strategy & Investment, doubts the Fed will take action at its next meeting July 31-Aug. 1, preferring to wait for more evidence of where the economy is headed.

But if growth and job creation continue to weaken, he says, Fed policymakers might unveil another round of bond purchases at its Sept. 12-13 meeting.

More Martin Crutsinger.

Next Article

Related Stories

More Related Stories

Featured Slide Shows

The week in 10 pics

close X
  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11
  • Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
    Credit: AP/LM Otero

  • Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
    Credit: AP/Matt Rourke

  • A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
    Credit: AP/Jenny Aicher

  • Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
    Credit: AP/Molly Riley

  • Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
    Credit: AP/J. Scott Applewhite

  • Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
    Credit: AP/Carolyn Kaster

  • O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
    Credit: AP/Las Vegas Review-Journal/Jeff Scheid

  • Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
    Credit: AP/NASA/Chris Hadfield

  • When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
    Credit: AP/Jacquelyn Martin

  • A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
    Credit: AP/The Duluth News-Tribune/Clint Austin

  • Recent Slide Shows

  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11

Related Videos

Comments

 0 Comments

Comment Preview

Your name will appear as username

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>

follow salon

Most Read

Popular on Reddit

links from salon.com

vote
Loaded terminology like "entitlements" and "welfare" skews the debate and alters America. How right-wingers use semantic tricks to kill government.
264 points265 points | 52 comments
vote
New Yorker launches tool by Aaron Swartz to protect leaks: Strongbox, co-created by the late technologist, is an open-source drop box for leaked documents
247 points248 points | 10 comments
vote
New Yorker launches tool by Aaron Swartz to protect leaks: Strongbox, co-created by the persecuted late technologist, is an open-source drop box for leaked documents
186 points187 points | 1 comment
vote
Today in How Did I Miss This: Iowa GOP is pushing to cut the pay of the remaining Supreme Court Justices that voted for legalization of gay marriage.
67 points68 points | 7 comments
vote
Obstruction will ruin the GOP: Playing politics and abusing the system can excite the extremes, but it's a recipe for long-term political disaster
54 points55 points | 8 comments

From Around the Web

Presented by Scribol
listener_new_rect The Listener: So long, Sookie Stackhouse

Recommendations