Bernanke warns of recessions, asks Congress to act adding that the Fed is ready to help
Federal Reserve Chairman Ben Bernanke didn’t paint a pretty picture of the US economy on Tuesday, warning that Congress needs to act to avert a budget crisis.
Official portrait of Federal Reserve Chairman Ben Bernanke. 2008 public domain photo
Without an agreement, tax increases and deep spending cuts would take effect at year’s end. Bernanke noted what the Congressional Budget Office has warned: A recession would occur, and 1.25 million fewer jobs would be created in 2013.
“Reflecting its concerns about the slow pace of progress in reducing unemployment and the downside risks to economic growth, the committee made clear at its June meeting that it is prepared to take further action,” Bernanke said in his testimony on the Fed’s semi-annual monetary policy report.
Prices for U.S. stocks initially fell on disappointment but clawed back to close up on the day on better-than-expected profit forecasts from Coca-Cola and Goldman Sachs. Prices for U.S. government debt fell.
“The market was preparing for some signal of imminent policy action from the Fed and they certainly did not get that,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange.
The Fed is prepared to take further action to try to help the economy if unemployment stays high, he said. Bernanke didn’t signal what steps the Fed might take or whether any action was imminent. And he noted there’s only so much the Fed can do.
Bernanke was giving his twice-a-year report to Congress on the state of the economy. He will testify Wednesday before the House Financial Services Committee.
