Bernanke Sees Hopeful Signs but No Quick Recovery
May 05 | 2009
WASHINGTON -- The chairman of the Federal Reserve, Ben S. Bernanke, said on Tuesday that the economy appeared to be stabilizing on many fronts but cautioned that a recovery was still months away and that "further sizable job losses" will continue even after an upturn begins.
"We continue to expect economic activity to bottom out, then to turn up later this year," Mr. Bernanke told the congressional Joint Economic Committee, according to his prepared remarks.
"Even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer-run potential for a while," he predicted. "We expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly."
Notwithstanding his caveats, the Fed chairman gave his most upbeat assessment since the United States fell into its most severe financial crisis since the Depression and its steepest recession since at least the early 1980s.
He noted that consumer spending, which sank sharply the second half of 2008, actually grew in the first quarter of this year. Sales of existing homes have been "fairly stable" since late last year, in part because plunging home prices have made houses more affordable and interest rates on some fixed-rate mortgages have fallen below 5 percent.
Mr. Bernanke said conditions in credit markets have revived slightly in recent weeks. Homeowners are refinancing mortgages at a rapid clip, and financial institutions have stepped up their sale of securities backed by of credit card loans, automobile debt and student loans.