The US economic recovery has strengthened and is gaining pace, but victory cannot be declared until the job market improves, US Federal Reserve Chairman Ben Bernanke warned in a rare press conference on Thursday.
“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established,” he said in remarks at the National Press Club in Washington.
Walking a thin line between talking down the recovery and undue optimism, Bernanke cited improvements in stubbornly low consumer spending and bank lending, in the same breath as warning unemployment will take “several years” to return to normal levels.
“The economic recovery ... appears to have strengthened in recent months, although, to date, growth has not been fast enough to bring about a significant improvement in the labor market,” he said.
Bernanke also sought to rebuff critics who argue the recovery no longer needs Fed support.
Detractors say the Fed’s decision to keep interest rates at historic lows and pump US$600 billion into the US economy risks stoking inflation.
“The economy, although it does look to be growing more quickly, is still in a deep hole,” Bernanke said.
He said broad inflation rates remain below the Fed’s target levels despite price rises for commonly used goods like food and gas.
“We have recently seen significant increases in some highly visible prices, notably for gasoline,” he said. “Nevertheless, overall inflation remains quite low.”
Doubling down, Bernanke said the Fed stood ready to pump more money into the economy if needed.
“If output is too low and unemployment is too high, then that would be a situation that requires more stimulus,” he said.
US stocks gained on Thursday on Bernanke’s remarks. The Dow Jones Industrial Average closed up 0.17 percent, the broader S&P 500 rose 0.24 percent and the tech-heavy NASDAQ increased 0.16 percent.
Bernanke made the comments in rare and sometimes nervous exchange with journalists. Instead of delivering the ever-so-carefully manicured speech and then slipping off the dais, Bernanke hung around for questions.
While Fed chairmen have occasionally given interviews and spoken to journalists off the record, press conferences by a sitting chairman are a rarity.
During the financial crisis Bernanke appeared with then-Treasury secretary Hank Paulson to explain how they proposed to rescue the US banking system, but by-and-large the Fed has stuck to tightly crafted speeches and meeting statements to get its point across.
It’s a seemingly small step, but with his unscripted responses parsed, reported on and put to work by investors, with billions if not trillions of dollars at stake, it was a risky one.
Taking written questions through a moderator, he admitted to being concerned that ad-hoc statements could be misunderstood by jittery markets, but he said “the public needs to know what we are doing and why we are doing it.”
With the economy still shaky and most of the Fed’s policy ammunition expended — interest rates could not be lower and billions of dollars are already being spent on stimulus — Bernanke said he also hoped to reduce damaging speculation by communicating through the press.
“It is important that markets anticipate and understand the actions we are taking and what is likely to cause changes in those policies,” he said.