Fed Chairman Ben Bernanke Strikes Cautious Note On US Economy

Ben Bernanke

The US economy is 'expanding moderately', but there are still clouds on the horizon, Federal Reserve chairman Ben Bernanke said in his latest statement on America's financial health.

In a cautious statement after a two-day meeting of the federal open market committee (FOMC), Bernanke said: 'Labour market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance'.

But the housing sector remains 'depressed', and increases in oil and gasoline prices threaten to increase inflation in the short term.

The latest report from the Fed is more subdued than last month's, when the FOMC noted unemployment had 'declined notably'. Since then the US has released disappointing news on jobs growth in the US, which added 120,000 new positions in March, half the number added in February.

The Fed's cautious tone will be closely analysed in Washington as president Barack Obama and his likely Republican rival Mitt Romney square off over the economy in the run-up to November's election.

Bernanke will hold a press conference at 2.15pm on Wednesday at which he will face questions about the jobs market and the likely impact on the US of Europe's economic woes. The UK was officially found to have slipped back into recession today, the first 'double-dip' recession in the UK since the 1970s.

The Fed stopped short of making any announcement about a third round of bond-buying to pump more cash into the economy – a policy known as quantitative easing, or QE.

David Semmens, a senior US economist at Standard Chartered, said: 'At the press conference we do not expect Bernanke to signal near-term further easing, although he will not take any options off the table'.

He said the US would release two reports on the jobs market before the next FOMC meeting on 19 and 20 June, and that they would be vital in determining what, if any, action the Fed will take.

'The weakness of the recovery we expect, coupled with the potential slowdown in employment growth, should mean that Bernanke continues to see the US economy as 'still far from having fully recovered', he said.

Semmens predicted that Bernanke could announce a third round of QE in June.

Powered by Guardian.co.ukThis article was written by Dominic Rushe, for guardian.co.uk on Wednesday 25th April 2012 18.23 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010


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