Bernanke offers no hints of imminent Fed action
Tuesday, July 17, 2012
WASHINGTON (AP) — Chairman Ben Bernanke offered a sour assessment of the U.S. economy Tuesday and said the Federal Reserve is ready to take further action if growth doesn’t pick up. 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 planned to launch another round of bond purchases, to drive down long-term interest rates and encourage more borrowing and spending.
Stock prices, which had been up moderately in early trading, slipped after Bernanke’s testimony was released. As he began testifying to the Senate Banking Committee just after 10 a.m. Eastern time, the Dow Jones industrial average was down about 14 points.
Bernanke is testifying to the House Financial Services Committee. His mid-year report to Congress on the economy comes as job growth has slumped, manufacturing has weakened and consumers have cut back on spending.
Bernanke acknowledged those trends. 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 weakened 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.