Friday, March 7, 2014
By Martin Crutsinger / The Associated Press
(Continued from page 1)
Chairman of the Federal Reserve Ben Bernanke testifies before the House Financial Services Committee on Capitol Hill on Wednesday.
Bernanke also repeated that the Fed plans to keep its benchmark short-term interest rate near zero as long as unemployment is above 6.5 percent. But Bernanke said the Fed could hold the rate lower even after it falls below 6.5 percent, particularly if unemployment falls because more people are leaving the workforce. The government counts people as unemployed only if they are actively looking for a job.
Bernanke said the economy is growing at "moderate pace" despite the adverse effects of tax increases and federal spending cuts. He noted that the housing market is rebounding and the job market has gradually improved.
"Despite these gains, the job situation is far from satisfactory," he said.
The economy grew at a subpar 1.8 percent annual rate in the January-March quarter. Many economists think growth in the April-June quarter weakened to an annual rate of 1 percent or less. That would make the third straight quarter of a growth rate below 2 percent.
Many expect growth will rebound in the second half of this year.
The Fed forecasts that the economy will grow between 2.3 percent and 2.6 percent this year, which is more optimistic than many economists predict. The pickup in economic growth that Fed officials expect is based in part on an assumption that the adverse effects of the tax increases and government spending cuts will diminish over time. And it assumes that the overall risks to the economy are lower now than they were when the central bank began the latest bond-buying program.
But he said threats remained. The federal budget policies could restrain growth for longer than expected. Or a congressional battle later this year over raising the government's borrowing limit could once again rattle investor and consumer confidence.