Bernanke: Economic growth to be frustratingly slow
WASHINGTON – Federal Reserve Chairman Ben Bernanke on Wednesday acknowledged that the pace of economic growth is likely to be "frustratingly slow," after the Fed downgraded its forecast for the next two years.
Bernanke said the central bank is open to purchasing more mortgage-backed securities to boost the struggling housing market, if conditions worsen. But he declined to offer details about what would trigger such a decision.
"We remain prepared to take action as appropriate to make sure the recovery continues," Bernanke said during a news conference after the Fed's two-day meeting.
Bernanke said the central bank is looking for growth and the job market to improve gradually over the next two years, but at a sluggish pace.
The debt crisis in Europe is a particular concern, Bernanke said. It could have adverse effects on confidence and growth. As a result, he said the central bank is closely monitoring the situation.
It was Bernanke's third news conference this year. The Fed chairman added the question-and-answer session with reporters to each of the four meetings in which the Fed updates its economic forecasts. The change was made to provide more background on the Fed's actions and insight into its thinking about the economy.
The central bank's latest forecast released Wednesday predicts that the economy will grow no more than 1.7 percent for all of 2011. For 2012, growth will range between 2.5 percent and 2.9 percent. Both forecasts are roughly a full percentage point lower than the Fed's projections from June.
The unemployment rate has been stuck near 9 percent for more than two years. The Fed doesn't see that changing this year. And it predicts it won't fall below 8.5 percent next year. In June, the Fed had predicted unemployment would drop to as low as 7.8 percent in 2011.
The new forecasts takes into account the substantial slowdown in growth that occurred earlier this year.
Bernanke said he sympathized with Occupy Wall Street protesters complaints about the sluggish economy.
"I am dissatisfied with the state of the economy," Bernanke said. "Unemployment is too high."
But the Fed chairman said criticism from Republicans, both in Congress and those running for president, was not valid. They have charged that the central bank's efforts have set the stage for higher inflation in the future.
Bernanke disagreed. He said the central bank had a very good record on inflation. Where the Fed has fallen short was in dealing with unemployment, he noted.
He declined to comment directly on a letter senior Republican leaders sent in September, which cautioned the central bank not to take further steps to lower interest rates.
At the September meeting, the Fed agreed to shuffle its portfolio to try and lower long-term interest rates.
"We listen to everybody's input," Bernanke said. "The most important thing is that we are free to make a decision based on the interest of the American people. That's what we are going to do."