US Federal Reserve Chairman Ben Bernanke signaled that the US central bank was not yet ready to abandon its ultra-low interest rates as it tried to keep a tentative economic recovery on track.
The Fed chairman, in his semiannual report to Congress on Wednesday, said he saw unemployment remaining stubbornly high, which would require the Fed to stay on a stimulative path, doing little to change monetary policy.
The report came after last week’s surprise increase in the discount rate for emergency bank loans prompted speculation that the Fed might be moving faster than anticipated to a tighter monetary stand.
In the House of Representatives Financial Services Committee, Bernanke said the economy had begun to show growth in the second half of last year after a massive stimulus effort from the Fed and the US government.
But he said the recovery “probably will be tempered by households’ desire to rebuild wealth, still-tight credit conditions facing some borrowers, and, despite some tentative signs of stabilization, continued weakness in labor markets.”
Because of these headwinds, Bernanke said that economic conditions are “likely to warrant exceptionally low levels of the federal funds rate for an extended period,” repeating a key phrase used by the central bank.
Bernanke was to appear for a second day of testimony on the report before the Senate Banking Committee yesterday.
The Fed has kept its base rate in a range of zero to 0.25 percent for more than a year as part of massive effort to spark recovery. A variety of other programs to restore credit flows are gradually being wound down.
The central raised its discount rate for emergency bank loans a quarter point last Friday but indicated that this was not a sign of tightening of overall policy.
The market focus on the Fed chief’s remarks overshadowed an unexpected drop in new home sales last month to a record low. Stocks rallied while the dollar fell.
Sales plunged 11.2 percent to a seasonally adjusted annual rate of 309,000, from a revised December rate of 348,000, the US Commerce Department said in a fresh sign of weakness in the troubled housing market.
The third consecutive month of declining sales surprised most analysts who had expected sales to increase to 354,000.
“Dollar bulls were sorely disappointed by Bernanke’s comments,” said Kathy Lien at Global Forex Trading.
“At minimum, traders wanted to hear optimism from the Fed Chairman but unfortunately his comments were subdued,” she said.
“With many Americans still out of work, it would have been politically unsavvy for Bernanke to appear overly optimistic, knowing that members of Congress will be criticizing the pace of recovery in an election year where their constituents face near-double-digit unemployment,” she said.
Bernanke reiterated that the Fed had an exit strategy to avoid a surge in inflation when the economy recovers, but was not ready to use this.
“The Federal Reserve is taking steps to ensure that it will be able to smoothly withdraw extraordinary policy accommodation when appropriate,” he said.
The Fed was readying a variety of tools, including the rate it pays on bank deposits at the Fed, to mop up liquidity in the financial system, he said.
NO HUMAN ERROR: After the incident, the Coast Guard Administration said it would obtain uncrewed aerial vehicles and vessels to boost its detection capacity Authorities would improve border control to prevent unlawful entry into Taiwan’s waters and safeguard national security, the Mainland Affairs Council (MAC) said yesterday after a Chinese man reached the nation’s coast on an inflatable boat, saying he “defected to freedom.” The man was found on a rubber boat when he was about to set foot on Taiwan at the estuary of Houkeng River (後坑溪) near Taiping Borough (太平) in New Taipei City’s Linkou District (林口), authorities said. The Coast Guard Administration’s (CGA) northern branch said it received a report at 6:30am yesterday morning from the New Taipei City Fire Department about a
IN BEIJING’S FAVOR: A China Coast Guard spokesperson said that the Chinese maritime police would continue to carry out law enforcement activities in waters it claims The Philippines withdrew its coast guard vessel from a South China Sea shoal that has recently been at the center of tensions with Beijing. BRP Teresa Magbanua “was compelled to return to port” from Sabina Shoal (Xianbin Shoal, 仙濱暗沙) due to bad weather, depleted supplies and the need to evacuate personnel requiring medical care, the Philippine Coast Guard (PCG) spokesman Jay Tarriela said yesterday in a post on X. The Philippine vessel “will be in tiptop shape to resume her mission” after it has been resupplied and repaired, Philippine Executive Secretary Lucas Bersamin, who heads the nation’s maritime council, said
CHINA POLICY: At the seventh US-EU Dialogue on China, the two sides issued strong support for Taiwan and condemned China’s actions in the South China Sea The US and EU issued a joint statement on Wednesday supporting Taiwan’s international participation, notably omitting the “one China” policy in a departure from previous similar statements, following high-level talks on China and the Indo-Pacific region. The statement also urged China to show restraint in the Taiwan Strait. US Deputy Secretary of State Kurt Campbell and European External Action Service Secretary-General Stefano Sannino cochaired the seventh US-EU Dialogue on China and the sixth US-EU Indo-Pacific Consultations from Monday to Tuesday. Since the Indo-Pacific consultations were launched in 2021, references to the “one China” policy have appeared in every statement apart from the
More than 500 people on Saturday marched in New York in support of Taiwan’s entry to the UN, significantly more people than previous years. The march, coinciding with the ongoing 79th session of the UN General Assembly, comes close on the heels of growing international discourse regarding the meaning of UN Resolution 2758. Resolution 2758, adopted by the UN General Assembly in 1971, recognizes the People’s Republic of China (PRC) as the “only lawful representative of China.” It resulted in the Republic of China (ROC) losing its seat at the UN to the PRC. Taiwan has since been excluded from