Bernanke says economy needs more time to heal

WASHINGTON Fri Apr 29, 2011 3:43pm EDT

U.S. Federal Reserve Chairman Ben Bernanke addresses a first-ever regularly scheduled news conference by a Fed chief following a Fed meeting at the Federal Reserve in Washington, April 27, 2011. REUTERS/Jason Reed

U.S. Federal Reserve Chairman Ben Bernanke addresses a first-ever regularly scheduled news conference by a Fed chief following a Fed meeting at the Federal Reserve in Washington, April 27, 2011.

Credit: Reuters/Jason Reed

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WASHINGTON (Reuters) - The U.S. economy is not fully recovered from its deep recession, with housing still weighing on growth, Federal Reserve Chairman Ben Bernanke said on Friday in a speech spelling out ways the U.S. central bank has studied lower income communities.

"Our economy is far from where we would like it to be," he said in prepared remarks to a conference.

The Fed earlier this week said it will see its $600 billion bond buying program, launched in November to spur a weak recovery, through to its planned conclusion at the end of June.

The world's largest economy grew at a sluggish 1.8 percent annual rate in the first three months of the year, but unemployment is still at a lofty 8.8 percent.

The depressed housing market is holding back the economic recovery, Bernanke said. Home foreclosure rates remain high and many families find themselves owing more for their homes than the homes are worth.

"Obviously, the problems in the labor market and the housing market are not unrelated," he said.

The Fed chairman said Fed research shows loans to individuals and businesses through community development financial institutions can boost economic activity. That business generates tax revenues that in turn permits government spending in ways that benefit these communities, he said.

"We at the Federal Reserve will remain closely attuned to the economic health of all communities, including low- and moderate-income communities," Bernanke said.

With rising prices fueling concern about inflation, the Fed is under some pressure to tighten policy after unprecedented and aggressive easing measures. Several Fed officials believe the central bank should act quickly to pare its bloated balance sheet and other major central banks around the world have begun to raise interest rates in response to price pressures.

However, the Fed made clear through a statement and a press conference by Bernanke on Wednesday that with a high jobless rate, extensive lost wealth, and inflation levels still not much higher than historic lows, the central bank has no immediate plans to withdraw support.

Bernanke said on Friday the economy is recovering at a moderate pace, and that there has been "welcome, if gradual" improvement in labor markets.

(Editing by Neil Stempleman)

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Comments (12)
Hal9King wrote:
OK — so what happens when the Fed quits buying bonds?
Nothing good.

Now what?

Apr 29, 2011 12:55pm EDT  --  Report as abuse
remery wrote:
The federal deficit is ‘simply not sustainable’ but Trillions of dollars for Wars, Billions of dollars for Bank Bailouts, Billions of dollars for Special Interests such as Renewable Energy, Billions of dollars in increases for the Pentagon to spend in other countries, now a billion plus to Libya and what does Bernanke have to say? “The combination of high unemployment, high gas prices and high foreclosure rates is a terrible combination,” nothing but lip service to Americans.

Apr 29, 2011 1:06pm EDT  --  Report as abuse
DrJJJJ wrote:
We can’t even find the will to cut deficits let alone reduce/retire any debt! I’d make a case the sh*t hits the fan in the next 90 days!! 18% (of all) are behind 60 days or more on mortgages and over a million homes are in the pipeline ready to blow out, state budgets are in crisis and must be dealt with this year and further/ big cuts to the public sector that must be made, will slow revenue and the cycle continues! Wish it were’nt so and wish I had a solution!! Asking what your country can do for you, poor morals and too big to function gov have ruined us and we’re not good at change or long term planning! You heard Greenspan a week or so back, NO SUBSTITUTES for massive cuts (medicare, defense and education too)! 80 million boomers (25% of US) lining up for unfunded entitlements galore and half our leaders really believe we can spend (invest) our way out! You’ve been warned! A vision without a way to pay for it is flirtin with dynamite! We’ve arrived! Note: the main reason the dow is rising is because of share holder greed/job cutting FYI!

Apr 29, 2011 1:28pm EDT  --  Report as abuse
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