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WASHINGTON – Federal Reserve Chairman Ben Bernanke warned Monday that it’s too soon to know whether the economic recovery will last. He again pledged to hold rates at record-low levels for an “extended period.”
The Fed chief’s speech to the Economic Club of Washington made clear he thinks the economy will struggle even as it recovers from the recession. He said the economy confronts “formidable headwinds” – including a weak job market, cautious consumers and tight credit.
Those forces “seem likely to keep the pace of expansion moderate,” he said.
The central bank has leeway to keep rates low because inflation is under control and is expected to stay tame. Some private forecasters fear the recovery could fizzle late next year as government stimulus fades.
Asked about prospects for such a “double dip” recession, Bernanke said he could not guarantee it won’t happen. He stuck with his forecast for a moderate recovery.
Bernanke said he expects “modest” economic growth next year. That should help push down the nation’s unemployment rate – now at 10 percent – “but at a pace slower than we would like,” he acknowledged.
Under one Fed forecast released last month, the jobless rate would remain high next year – ranging from 9.3 percent to 9.7 percent. The Fed has warned it could take five or six years for the job market to recover.
To nurture the recovery, the Fed has kept rates near zero for a year. The central bank is expected to leave rates at those levels at its meeting Dec. 15-16.
When asked about rates, Bernanke joked, “Well, they can’t go much further down.”
He went on to repeat the Fed’s pledge to keep rates at record lows for an extended period.
“That remains where we are, but we’re going to have to continue to look at the economy,” Bernanke said.
