Federal Reserve Chairman Ben Bernanke told international bankers at a conference in Atlanta on Tuesday that while the U.S. economic recovery remains “uneven,” growth should improve somewhat in the year’s second half.
The central bank chairman echoed earlier remarks that the economy still needs the Fed’s accommodative polices and that he expected interest rates to remain low for an extended period. Bernanke said the recovery is progressing at a “frustratingly slow” pace to the millions of unemployed and under-employed Americans.
“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established,” he said during the International Monetary Conference at the Ritz-Carlton Buckhead.
Rex Macey, chief investment officer at Wilmington Trust in Atlanta, said that given May’s bad economic news, Bernanke was “right in line” saying the central bank would continue to try to be accommodative to private sector growth.
“He signaled what they were looking for, which is sustained job creation,” Macey said.
Bernanke’s comments came after disappointing jobs and manufacturing figures for the month of May. The national unemployment rate crept up to 9.1 percent.
Bernanke called inflation a concern, but said “so far at least there is not much evidence that inflation is becoming broad based or ingrained in our economy,” adding it is “likely to return to more subdued levels in the medium term.”
The Fed chairman has previously said recent increases in commodities prices, thanks in part to the run-up in gasoline prices, would be “transitory.”
Regarding federal spending, Bernanke said lawmakers should address the deficit with spending cuts with a “credible, long-term plan for fiscal consolidation.” He warned lawmakers not to dislodge the fragile recovery with sharp cuts in the near term that could be “self-defeating.”
Drew Klepchick, a principal at Buckhead-based Homrich Berg, said Bernanke was giving Congress a strong signal that “we’re still fragile.”
After Bernanke’s speech, JPMorgan Chase & Co. Chief Executive Jamie Dimon questioned the Fed chairman whether the central bank had studied the potential combined impact from the post-crisis financial reform. Dimon said he feared within a decade or two, the reforms being designed would be seen as slowing the economy.
Bernanke replied that a complete analysis was too complicated to have been done, but that the Fed was trying to strike a balance between preventing another collapse and keeping credit flowing.
“We have to take necessary steps to make sure we don’t have a repeat of what happened,” Bernanke said. “I think we can do that in a way that preserves the key functions of banking, that allows credit to be extended, allows basic financial services to be extended. But there is some tradeoff there.”
Dennis Lockhart, president and CEO of the Federal Reserve Bank of Atlanta, said earlier Tuesday in a speech in Charlotte that “recent disappointing incoming data are not a reason to panic,” and that the economy had exhibited "pretty impressive resilience” through a number of recent shocks. Though, the Atlanta Fed chief said he was still troubled by “a lack of conviction in this economy.”
Lockhart said it is not yet time to begin unwinding the Fed’s efforts to stimulate the economy.
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