The economic expansion is solid enough to endure despite recent signs of weakness, Federal Reserve Chairman Ben S. Bernanke said Tuesday, as he offered little reason to think that the central bank will undertake new efforts to prop up growth.
In a speech in Atlanta, the Fed chief gave his first public comments on the economy in six weeks. During that time, a slew of economic data has indicated that the pace of the recovery has slowed this spring. Most recently, the Labor Department said Friday that job growth slowed dramatically in May and that the unemployment rate ticked up to 9.1 percent.
“U.S. economic growth so far this year looks to have been somewhat slower than expected,” Bernanke said, addressing the International Monetary Conference, according to a prepared text. “A number of indicators also suggest some loss of momentum in the labor market in recent weeks.”
Bernanke, however, said he views the causes as partly temporary, suggesting that momentum will accelerate as the year progresses.
“With the effects of the Japanese disaster on manufacturing output likely to dissipate in the coming months, and with some moderation in gasoline prices in prospect, growth seems likely to pick up in the second half of the year,” Bernanke said.
Despite the recent grim economic news, Bernanke’s comments suggest that there is little chance that the Fed will undertake another round of it “quantitative easing” by buying billions of dollars in Treasury bonds to try to expand the money supply and strengthen the economy.
The second round of those purchases, $600 billion of them, are to conclude this month. Some on Wall Street have speculated that “QE3” might be a possibility, but in fact Bernanke seemed to offer something of a rebuttal to analysts who have suggested that new Fed action would finally put the economy on track.
“The U.S. economy is recovering from both the worst financial crisis and the most severe housing bust since the Great Depression,” and faces additional challenges from the Japanese disaster and high commodity prices, Bernanke said. “In this context, monetary policy cannot be a panacea.”
Read more at The Washington Post.