US Federal Reserve Chairman Ben Bernanke on Monday said the US economy’s recovery remained fragile and unemployment may be high for some time, cooling anticipation of an early increase in US interest rates.
Three days after news of a surprise fall in the US unemployment rate prompted investors to speculate the Fed might move more quickly to raise rates than had been expected, Bernanke said the Fed — the US central bank — was sticking to its pledge to hold benchmark borrowing costs at exceptionally low levels for an “extended period.”
“We still have some ways to go before we can be assured that the recovery will be self-sustaining,” he told the Economic Club of Washington. “Also at issue is whether the recovery will create the large number of jobs that will be needed to materially bring down the unemployment rate.”
A report on Friday showed the US labor market last month turned in its best performance since the economy fell into recession two years ago as the unemployment rate receded slightly from a 26-and-a-half-year high and job losses slowed sharply.
The data led investors to ramp up bets that benchmark US rates would rise by the middle of next year, lifting the dollar to its biggest gain in nearly a year.
However, Bernanke on Monday said Fed officials, who meet next week to debate policy, would bide their time to let the recovery gather strength. His comments drove the dollar and prices for US government bonds lower, while offering temporary support to stocks.
“Right now we are still looking at the extended period given that conditions remain — low rates of [resource] utilization, subdued inflation trends and stable long-term inflation expectations,” he said. “That remains where we are.”
Bernanke said tight credit and the weak job market still posed “formidable headwinds” to recovery, but he said officials would need to consider recent signs that the economy was gaining strength at their meeting yesterday and today.
The Fed cut rates to near zero a year ago and has pumped more than US$1 trillion into the economy to battle a deep recession. Now, analysts are beginning to wonder when it will begin to remove its extraordinary support.
Bernanke said that although the Fed would continue to monitor inflation closely, it appears likely to remain subdued for some time and could in fact move lower.
The challenge the Fed faces in withdrawing its massive support for the economy is not how to do it but when, he said.
The central bank has all the tools it needs, and could raise rates even if its balance sheet — swollen by purchases of mortgage-related debt and longer-term Treasury securities — remains large, Bernanke said.
He said the Fed’s ability to pay interest on the reserves banks hold at the Fed would be “an important tool” to push borrowing costs higher, and said there were a number of ways it could withdraw money from the financial system.
“If necessary, we always have the option of reducing the size of our balance sheet by selling some of our securities,” he said.
FALSE DOCUMENTS? Actor William Liao said he was ‘voluntarily cooperating’ with police after a suspect was accused of helping to produce false medical certificates Police yesterday questioned at least six entertainers amid allegations of evasion of compulsory military service, with Lee Chuan (李銓), a member of boy band Choc7 (超克7), and actor Daniel Chen (陳大天) among those summoned. The New Taipei City District Prosecutors’ Office in January launched an investigation into a group that was allegedly helping men dodge compulsory military service using falsified medical documents. Actor Darren Wang (王大陸) has been accused of being one of the group’s clients. As the investigation expanded, investigators at New Taipei City’s Yonghe Precinct said that other entertainers commissioned the group to obtain false documents. The main suspect, a man surnamed
DEMOGRAPHICS: Robotics is the most promising answer to looming labor woes, the long-term care system and national contingency response, an official said Taiwan is to launch a five-year plan to boost the robotics industry in a bid to address labor shortages stemming from a declining and aging population, the Executive Yuan said yesterday. The government approved the initiative, dubbed the Smart Robotics Industry Promotion Plan, via executive order, senior officials told a post-Cabinet meeting news conference in Taipei. Taiwan’s population decline would strain the economy and the nation’s ability to care for vulnerable and elderly people, said Peter Hong (洪樂文), who heads the National Science and Technology Council’s (NSTC) Department of Engineering and Technologies. Projections show that the proportion of Taiwanese 65 or older would
Democracies must remain united in the face of a shifting geopolitical landscape, former president Tsai Ing-wen (蔡英文) told the Copenhagen Democracy Summit on Tuesday, while emphasizing the importance of Taiwan’s security to the world. “Taiwan’s security is essential to regional stability and to defending democratic values amid mounting authoritarianism,” Tsai said at the annual forum in the Danish capital. Noting a “new geopolitical landscape” in which global trade and security face “uncertainty and unpredictability,” Tsai said that democracies must remain united and be more committed to building up resilience together in the face of challenges. Resilience “allows us to absorb shocks, adapt under
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday said it is building nine new advanced wafer manufacturing and packaging factories this year, accelerating its expansion amid strong demand for high-performance computing (HPC) and artificial intelligence (AI) applications. The chipmaker built on average five factories per year from 2021 to last year and three from 2017 to 2020, TSMC vice president of advanced technology and mask engineering T.S. Chang (張宗生) said at the company’s annual technology symposium in Hsinchu City. “We are quickening our pace even faster in 2025. We plan to build nine new factories, including eight wafer fabrication plants and one advanced
RSS