Bernanke: Pessimistic on US economy, but no stimulus hint
The Federal Reserve chairman, Ben Bernanke's speech to lawmakers has disappointed global financial markets that had looked forward to the Fed chairman for any signs the central bank was moving closer to a third round of bond purchases to support the economy.
Ben Bernanke gave a bleak outlook for the US economy, citing a slowdown in economic activity this year and a still high rate of unemployment.
“The US economy has continued to recover, but economic activity appears to have decelerated somewhat during the first half of this year,” said Bernanke.
Bernanke said recent data suggest that real gross domestic product growth increased at a 2% pace in the first quarter of this year and will grow at an even slower rate in the second quarter with the recovery hampered by tighter financial conditions due to Europe's debt crisis and uncertainty surrounding US fiscal policy.
Bernanke said the recent deterioration in the labor market suggests the nation's 8.2% jobless rate is going down too slowly.
As the economic recovery falters, despite the measures taken by the Fed which has held overnight borrowing costs near zero since December 2008 and has bought $2.3 trillion in government and mortgage-related debt in an effort to push long-term interest rates lower, the Fed Reserve has promised to keep rates at rock bottom levels until at least 2014 and has extended the average maturity of bonds in its portfolio in a further attempt to depress long-term borrowing costs.
Bernanke also said the Fed remains in close contact with European authorities, and is focused on making sure the US financial system remains resilient to financial shocks.
"Europe's financial markets and economy remain under significant stress, with spill over effects on financial and economic conditions in the rest of the world, including the United States," he said.