UPDATE 1-Bernanke says U.S. consumption still too weak
By Pedro Nicolaci da Costa
WASHINGTON, March 22 (Reuters) - U.S. consumer spending is still too weak to ensure a healthy pace of economic growth, Federal Reserve Chairman Ben Bernanke said on Th ursday.
"Right now, in terms of debt and consumption, we're still way low relative to the pattern before the crisis," Bernanke told students in the second of two lectures at The George Washington University. "We lack a source of demand to keep the economy growing."
The U.S. economy grew 3 percent in the fourth quarter of 2011 but that rate was seen slowing to just under 2 percent in the first three months of this year. Consumer spending accounts for over 70 percent of total output in the world's largest economy.
Much of Bernanke's lecture focused on the build-up of the housing bubble and the failures that preceded the financial crisis of 2007-2008. The Fed Chairman acknowledged regulators, including the central bank itself, had fallen down on the job, particularly with regards to esoteric Wall Street securities and mortgage-related activity.
"Where there were authorities and powers, they weren't always effectively used, and that obviously led to some weaknesses," he said.
Although Bernanke has been highly visible this week, jumping between congressional testimonies and his lectures to students, he has not shed additional light on what investors are primarily concerned with - the prospect for further monetary easing.
Analysts now see a third round of bond purchases or quantitative easing as less likely given recent improvement in the economic backdrop, especially in the job market.
Still, Fed officials including Bernanke have made clear they still see the 8.3 percent unemployment rate as too high for comfort, and that the risk of contagion from Europe's financial crisis, while smaller, has not completely abated.
In response to the deepest recession in generations, the Fed, under Bernanke's leadership, slashed short-term borrowing costs to zero and have promised to leave them there until at least late 2014. The central bank has also sharply expanded its balance sheet through the purchase of some $2.3 trillion in Treasury bonds and mortgage-backed debt.
- Air strike kills 15 civilians in Yemen by mistake: officials
- North Korea executes leader's powerful uncle in rare public purge |
- Twitter backtracks on block feature after users revolt
- Insight: In Yemen, al Qaeda gains sympathy amid U.S. drone strikes
- Iran angry over U.S. sanctions, nuclear talks interrupted