In his first appearance before congress, following his re-appointment last month, Federal Reserve Chairman Ben S. Bernanke offered a relatively somber view of the U.S economic situation before Congress yesterday, despite recent signs of strong growth.
Yesterday Bernanke presented the highly awaited for Federal Reserve’s semiannual Monetary Policy Report to the Congress. The Fed chairman opened to admitting that while the U.S economy is making a promising recovery, economic conditions still requires low interests to encourage both consumer and business demand, especially once the federal stimulus package expires.
“A sustained recovery will depend on continued growth in private-sector final demand for goods and services,” Bernanke told the House Financial Services Committee today in Washington at the start of his two days of semi-annual testimony before Congress. “Private final demand does seem to be growing at a moderate pace.”
Bernanke’s testimony follows the Federal Reserve Board’s decision last week to raise the cost of direct loans to banks by 0.25bps to 0.75%.
Last week, the Fed portrayed the move as a “normalization” of bank lending and said it had not altered the outlook for the economy or monetary policy -a message that was clearly re-iterated by Fed chairman throughout yesterday’s testimony in the forex online market.
The currency market was hoping that last’s week unexpected move would lead to a possible near-future “Tighter” monetary policy.
While Bernanke pointed out that the Fed will need to start tightening its policy “ at some point”, for the mean time, slack labor markets and low inflation will allow the Federal Open Market Committee to keep the benchmark lending rate, which has been in a range of zero to 0.25% for more than a year, low “for an extended period.”
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