Chairman of the Federal Reserve Ben Bernanke affirmed Thursday that the recovery from the financial crisis has been “less robust” than what was hoped and that “persistent factors” have been holding back the recovery.
In a speech he gave at the Economic Club of Minnesota Luncheon, in Minneapolis, Minnesota, Bernanke noted that it has been almost exactly three years since the beginning of the “most intense phase” of the financial crisis, where there have been “some positive developments over the past few years.”
“Nevertheless, it is clear that the recovery from the crisis has been much less robust than we had hoped,” he added.
He indicated “importantly, economic growth over the past two years has, for the most part, been at rates insufficient to achieve sustained reductions in the unemployment rate, which has recently been fluctuating a bit above nine percent.”
He said that “the pattern of sluggish economic growth was particularly evident in the first half of this year, with real gross domestic product (GDP) estimated to have increased at an annual rate of less than one percent, on average, in the first and second quarters,” saying “some of this weakness can be attributed to temporary factors.”
“However, the incoming data suggest that other, more persistent factors also have been holding back the recovery,” he added.
Bernanke she light on the August meeting of the Federal Open Market Committee (FOMC), which expects “a somewhat slower pace of recovery over coming quarters than it did at the time of the June meeting, with greater downside risks to the economic outlook.”
He stressed that “inflation picked up significantly;” noting over the first half of this year, the price index for personal consumption expenditures rose at an annual rate of about 3.5 percent, compared with an average of less than 1.5 percent over the preceding two years. “However, inflation is expected to moderate in the coming quarters as these transitory influences wane,” he added.
“The Federal Reserve has a range of tools that could be used to provide additional monetary stimulus,” he affirmed.
According to Bernanke, the FOMC “will continue to consider those and other pertinent issues, including, of course, economic and financial developments,” at the meeting that is due later this month “and are prepared to employ these tools as appropriate to promote a stronger economic recovery in a context of price stability,” he stressed.