Bernanke Predicts Slow Progress on Unemployment

Federal Reserve Chairman Ben S. Bernanke said progress in reducing unemployment is likely to be “frustratingly slow” and repeated the Fed is ready to take further action to boost the recovery.

“The U.S. economy has continued to recover, but economic activity appears to have decelerated somewhat during the first half of this year,” Bernanke said today in testimony for delivery to the Senate Banking Committee in Washington. The Fed is “prepared to take further action as appropriate to promote a stronger economic recovery,” he said.

In response to questions, Bernanke said the central bank’s easing tools include further purchases of assets, including mortgage-backed securities, reducing the interest rate that the Fed pays on reserves that banks keep with the Fed and altering the communications on the outlook for interest rates.

Bernanke said growth is slowing as business investment cools in response to the European crisis and the prospect of fiscal tightening in the U.S. At the same time, households are restraining spending as unemployment remains elevated and credit is hard to get.

Bernanke and his colleagues on the Federal Open Market Committee are considering whether the economy will need additional stimulus to reduce a jobless rate stuck above 8 percent since February 2009. Minutes of their June meeting show that a few participants believed the Fed will need to do more, while several others said new easing would be warranted if growth slows, risks intensify or inflation seems likely to fall persistently below the Fed’s 2 percent target.

By Joshua Zumbrun and Craig Torres
Read More: Bloomberg