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Federal Reserve Chairman Ben Bernanke visited Capitol Hill today. In testimony, he offered no sign the Fed was ready to give the sputtering economy another boost. He did tell lawmakers the economy continues to face challenges.
Bush as NPR's John Ydstie reports, he said Fed policymakers have yet to decide what their next move might be.
JOHN YDSTIE, BYLINE: A lot of investors, analysts and commentators believe that the disappointing jobs report last Friday, the turmoil in Europe, and the slowdown in China should convince the Fed to provide more stimulus. Yesterday's big rally in the stock market was at least partly based on that belief. But Chairman Bernanke refused to tip his hand during testimony before the Joint Economic Committee. In fact, Bernanke's assessment seemed at odds with Wall Street's view that the economy has weakened significantly.
BEN BERNANKE: Economic growth appears poised to continue at a moderate pace over coming quarters, supported in part by accommodative monetary policy. In particular, increases in household spending have been relatively well sustained.
YDSTIE: Bernanke added that the drop in gasoline prices should help support spending. And he pointed to some encouraging signs in the housing market. But Bernanke did express concern about the drop in job growth over the past three months, including Friday's disappointing employment report that included an uptick in the unemployment rate.
Joint Economic Committee chairman, Senator Bob Casey, a Democrat from Pennsylvania, got things going by addressing the matter on everyone's mind.
SENATOR BOB CASEY: The basic question I have for you is, is the Federal Reserve planning to take any additional action in the short-term to spur economic growth and create jobs.
YDSTIE: Bernanke said that the next meeting Fed policymakers, coming up in less than two weeks, will address that question. Prior to a decision, he said, policymakers will have to answer this question.
BERNANKE: Will there be enough growth going forward to make material progress on the unemployment rate?
YDSTIE: Bernanke said it's still a puzzle just why job growth dropped off so quickly, after rapid employment gains during the winter. One possibility is that warm winter weather boosted job growth back then. But, another theory is that job growth was very strong because employers were quickly trying to add back workers to more normal levels, after they cut payrolls more than necessary during the Great Recession. Bernanke said if that is the cause it's a bit troubling.
BERNANKE: If that is true, the implication is that if growth stays near, say, two to 2.5 percent that the improvement in the unemployment rate going forward might be quite limited.
YDSTIE: And that's the growth rate the Fed is predicting for the year. Bernanke re-iterated that it is part of the Fed's mandate to attain maximum employment, suggesting the Fed will take more action to stimulate the economy if job growth doesn't improve.
Bernanke said the turmoil in Europe has affected the U.S. economy, acting as a drag on U.S. exports, weighing on confidence and pressuring financial institutions. He said there's little more the U.S. can do now beyond what it has to help Europe.
The chairman also again urged Congress to take action to avoid the fiscal cliff looming at the end of the year, when the Bush tax cuts expire, along with the payroll tax cut, and automatic spending cuts take effect. He said the combination could drive the economy back into recession.
John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
