Bernanke Carries Extra Burden for Economic Recovery
Jessica Rettig

 

Fed Chairman Ben Bernanke is likely to be guardedly optimistic on the outlook for the economy

Federal Reserve Chairman Ben Bernanke is a man on the spot. With Congress tied in knots over how best to boost a weak economy, there is an extra burden on the powerful Fed leader to keep the economy growing amid considerable uncertainty. So his words will undergo even more scrutiny than usual whenever he testifies on the outlook for the economy.

Bernanke is likely to be guardedly optimistic, with the emphasis on "guardedly." Recently, the Fed released the minutes from the June 22-23 meeting of its policy-setting Federal Open Market Committee, chaired by Bernanke, which painted a picture of the economy continuing to grow, but more slowly than anticipated in the spring. The Fed forecast at the meeting projected the gross domestic product growing 3.0 to 3.5 percent this year, down from the 3.2 to 3.7 percent forecast just a couple of months ago. The committee decided not to alter its monetary policy, signaling a further sustained period of very low interest rates, but said it may need to take further stimulative actions, including buying mortgage assets, "if the outlook were to worsen appreciably."

But even if the Fed projections hold and the country avoids a double-dip recession, the tepid economic growth will do little to help with what most Americans view as the nation's most pressing problem: jobs. The Fed predicts the unemployment rate will stick above 9 percent through the year and will decline only to around 8.5 percent by the end of 2011. In fact, the Fed doesn't expect to see pre-recession rates of around 5 percent for at least five years. "Over the next few years, the Fed must craft policies that ensure that our economy accelerates its progress along the recovery path it has begun to trace," economist Janet Yellen said last Thursday during confirmation hearings to become the Fed's deputy chairman. "With unemployment still painfully high, job creation must be a high priority of monetary policy."

At present, Congress's use of government spending to spur the economy is hobbled by fighting between Republicans and Democrats over budget issues, in particular concern over the federal debt. On a trip to an advanced battery factory in Holland, Mich., last week, President Obama said his $787 billion stimulus package is helping lift the nation out of recession, even if many Americans doubt the spending has helped significantly. Last week, the White House issued a new estimate showing that stimulus spending has saved or created 2.5 million to 3.6 million jobs.

But Congress is now hung up over more stimulus spending.

According to a recent CBS News Poll, 3 out of 4 Americans believe the effects of the recession will last at least an additional two years. So, when Bernanke presents his semiannual Monetary Policy Report to Congress today, he may just be giving the nation some bittersweet news that it already knows.

 

 

Bernanke Carries Extra Burden for Economic Recovery

 

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