Federal Reserve Chairman Ben Bernanke warned Congress on Wednesday that unless growth accelerated, the unemployment rate would not keep dropping in the months ahead. However, despite delivering a tempered outlook for the U.S. economy, he stopped short of signaling further Fed bond purchases to stimulate growth.
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The national unemployment rate reached a three-year low of 8.3 percent in January, falling from a high of 9.1 percent in August. The swift decline has surprised many economists.
“The decline in the unemployment rate over the past year has been somewhat more rapid than might have been expected, given that the economy appears to have been growing during that time frame at or below its longer-term trend,” Bernanke told the U.S. House of Representatives Financial Services Committee.
Bernanke’s speech contained no allusions to the possibility of a third round of quantitative easing, undercutting prices for U.S. stocks and government bonds and sending gold futures down more than 4 percent in the biggest one-day drop so far this year.
The central bank has already pledged to keep overnight interest rates in the zero to 0.25 percent range through late 2014, and has bought $2.3 trillion in bonds in an effort to keep interest rates low and boost economic activity. The Fed’s highly accommodative monetary policy stance is meant to support its dual mandate to achieve full employment while keeping down inflation.
When asked if he thought the Fed’s easy money policies were hurting savers, Bernanke said that, on the contrary, he believed savers could benefit from even lower interest rates, as they would help create a stronger economy. “It is arguable that interest rates are too high, that they are being constrained by the fact that interest rates can’t go below zero,” he quipped.
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