Bernanke: Record-low rates needed to aid economy
WASHINGTON – Record-low interest rates are still needed to rev up the economic recovery, Federal Reserve Chairman Ben Bernanke told Congress on Thursday. Bernanke, in testimony to the House Financial Services Committee, essentially repeated the rationale behind the Fed's decision last week to hold rates near zero. He cited still-fragile economic conditions, and noted that inflation is low, which gives the Fed leeway to keep rates at rock-bottom levels. The Fed chief didn't offer new clues about when the central bank might reverse course and start tightening credit. He said that would need to happen when the "expansion matures." Some investors and analysts think higher rates could come in the fall. Deciding when to tighten credit is the biggest challenge facing Bernanke, whose second term started in February. Moving too soon could short-circuit the recovery. Waiting too long could unleash inflation and sow the seeds for new speculative bubbles in stocks or commodities or other assets. One of the reasons the Fed is holding rates so low is because of stubbornly high unemployment, Bernanke said. It's now at 9.7 percent, a potential restraining force on the economy's rebound. Bernanke said the Fed "will not be able to wait until things are completely back to normal" before it starts to boost rates. But the Fed wants to make sure that the economy is on a sustainable growth path and that jobs are being created, he said. The Fed also wants to see more lending by banks before it starts tightening credit, Bernanke said. "The key point ... is that the Fed is no closer to implementing its exit strategy," said Paul Dales, an economist at Capital Economics. Bernanke's remarks suggest "he is in no hurry" to raise rates, Dales said. Source: http://www.intermoney.org/
