US Federal Reserve Chairman Ben Bernanke says that without faster economic growth, it could take “a few more years” for US unemployment to decline to a normal rate.
In an interview with ABC News, Bernanke said on Tuesday that he is sleeping better these days because the US financial system looks stronger, and threats from Europe’s debt crisis look less worrisome.
He said the jump in gas prices should have only a moderate drag on growth.
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However, Bernanke said the economy is not strong enough to continue to reduce unemployment quickly. Unemployment has declined from 9 percent in September to the current 8.3 percent. A healthy level is roughly between 5 percent and 6 percent, Bernanke said.
“The recent news has been good, but I think we need to be cautious and make sure this is sustainable,” Bernanke said in the interview with ABC’s Diane Sawyer. “We haven’t quite yet got to the point where we can be completely confident that we’re on a track to full recovery.”
He said stronger growth would “guarantee that we keep making progress in the labor market.”
Bernanke’s comments in the interview echoed a speech he gave on Monday. In it, he said the US job market remains weak despite three months of strong hiring and that the Federal Reserve’s low-interest rate policies are still needed to boost the economy.
Those remarks ignited a rally in the stock market on Monday. Investors read Bernanke’s comments as a signal that the Fed will likely stick to its plan to hold short-term interest rates at record lows through 2014.
Asked about the late-2014 target for any rate increase, Bernanke said in the ABC interview that that timetable is not a guarantee “but our best estimate” for short-term interest rates based on the Fed’s outlook for growth.
“We’re trying to tell the public ... how we see the economy evolving, but of course if the economy looks different, if things get a lot stronger or a lot weaker, we’ll ... have to change our plans,” Bernanke said.
He added: “Unless we get faster growth than we’ve been seeing, it is probably going to take a while” to return to an unemployment rate of 5 percent to 6 percent.
“It could be a few more years,” he said.
Bernanke said the Fed is keeping open its options for taking further action to aid the economy, including another possible round of bond buying. Such a step would be intended to further lower borrowing costs.
“We have to be prepared to respond to however the economy evolves,” he said.
Bernanke called the recent rise in gas prices a “moderate risk” to the economy, but he said the strengthening job market and other signs of economic health would help support the recovery.
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