Economic recovery slower than expected, Bernanke says

Economic Recovery slower than expected

Ben S. Bernanke, the chairman of the Federal Reserve, said that the impact of the financial meltdown has caused the U.S. economy to recover more slowly than expected despite the reduced interest rates brought about by the $1 trillion in bond purchases.

Speaking at a conference at Princeton University yesterday, Bernanke said that, “By buying mortgage-backed securities and Treasuries we did, I think, additionally stimulate the economy.”

“We avoided what could have been a global meltdown,” Bernanke continued. “But even so, we got a taste of how powerful a financial crisis is on real activity. That blow which knocked the world economy into a deep recession in the second half of '08 and the early '09, we are only recovering from that at a pace slower than we would like.”

The central bank said it was “prepared to provide additional accommodation if needed to support the economic recovery.”

They also kept the benchmark lending rate low by setting it between zero and 0.25 percent while pointing out that efforts to handle inflation were at levels “somewhat below” their mandate to attain fairly static prices and decrease unemployment.

The statement from the central bank enhanced speculation that the Fed will purchase more Treasuries during the remaining months of the year.

“The purchases reduced interest rates directly by raising the prices of the assets that we purchased,” Bernanke said.

The U.S. economy grew 1.6 percent in the second quarter, and is expected to hit an annual rate of 1.4 percent, forecasting company Macroeconomic Advisers said.

Posted by James Fried on Sunday September 26 2010, 9:54 AM EDT. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0