Jan 12 (Reuters) - The weak economic state of Europe has emerged as a major concern while the prospect of a stronger dollar is a risk for U.S. exporters, former Federal Reserve Chairman Ben Bernanke said on Monday.
Speaking at an annual conference for retail industry executives, Bernanke said that improvements in the labor market, in industry and in consumer confidence meant the U.S. economy appeared stronger than at any time since the financial crisis.
Still, there was a risk in the faltering economies of Europe, Bernanke said, though he didn’t believe that problem by itself would derail the U.S. economic recovery.
“The market area that I’m most concerned about is Europe, the euro zone. They have not been able to take the steps needed to help the economy recover,” Bernanke said in response to questions from Stephen Sadove, chairman of the board of the National Retail Federation, an industry lobbying group.
Bernanke said “political and legal resistance” had prevented European central bankers from taking more aggressive monetary steps. Inflation in Europe is at about half a percent, against a target of around 2 percent, he noted.
“So right now, Europe is in a very weak condition, it is pretty close to the deflationary zone, and that is our biggest trading partner,” he said.
With the U.S. economy strengthening and given that monetary policy would likely remain easy in Europe for a long time and Japan carrying out aggressive monetary easing, Bernanke said “you would expect to see the dollar strengthen quite a bit.”
He said a lot of the dollar’s reaction to those conditions “had already happened. Some of that has already been built in, so you don’t necessarily assume the dollar will continue to strengthen the way it has up to this point.”
He considered such global developments as “a bit of a risk to the U.S ... because U.S. companies that export or have foreign subsidiaries are going to have to deal with that stronger dollar.” (Reporting by Nathan Layne; Editing by Bernadette Baum)
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