Despite a slowdown in job growth, Federal Reserve Chairman Ben Bernanke told Congress on Thursday that he expects the economy to expand moderately this year and did not signal that policymakers will take further steps to stimulate growth.
He said the Fed is considering possible moves to boost economic activity and will make a decision at a meeting later this month. But he declined to be specific and painted a less dour portrait of the economy than recent reports suggest. Job growth slowed from a 200,000-plus pace early this year to 69,000 last month.
"We have made no decisions," Bernake told the Joint Economic Committee. "I wouldn't want to take anything off the table."
Bernanke said that more robust job gains likely would require stronger economic growth, and that the European debt crisis poses a significant risk to the U.S. economy. The Fed, he added, is prepared to provide further stimulus.
Economist Paul Edelstein of IHS Global Insight said in a research note that Bernanke "seemed to try to walk back market expectations of another round" of Treasury bond purchases aimed at cutting long-term interest rates and spurring more purchases of homes, cars and factory gear.
A similar initiative known as Operation Twist that's shifting the Fed's portfolio from short-term to long-term bonds is slated to end June 30. The Fed's policymaking committee is scheduled to meet June 19 and 20.
Edelstein said the Fed likely will take a middle-ground approach and agree to continue Operation Twist at this month's meeting.
On the positive side, Bernanke said consumer spending has been solid and will likely be boosted further by falling gasoline prices. But he said the recovery faces major risks from both the worsening European crisis and a confluence of expected tax increases and spending cuts at year's end.
Bernanke added that if the Bush-era income tax cuts and a temporary payroll tax reduction expire in December, at the same time that automatic spending cuts to trim the deficit kick in, a recession could follow. He urged Congress to make plans to reduce the deficit long-term while taking short-term steps to keep taxes from rising or government spending from plummeting.
Saying Fed action could help the economy but interest rates are already near historic lows, he added, "I'd be much more comfortable if Congress would take some of this burden from us."
Most Popular Stories
- 15 Myths That Could Ruin Your Hispanic Ad Campaign
- Bitcoin Clones Lurch Onto Financial Scene
- General Motors Names Mary Barra as First Female CEO
- AIG to Create 230 Jobs in Charlotte
- Clinton to Keynote Annual Simmons Leadership Conference
- Pacific Trade Pact Delay Hinders U.S. Pivot to Asia
- Californians Want to Legalize Marijuana
- Scripps Shares Rise on Reported Bid Talks
- Russia Says Nyet to Canada North Pole Claim
- Budget Deal Sets Off Grumbles in Both Houses