Bernanke Says Too Early for Victory on U.S. Recovery

Federal Reserve Chairman Ben S. Bernanke
Ben S. Bernanke, chairman of the U.S. Federal Reserve. Photographer: Andrew Harrer/Bloomberg

Federal Reserve Chairman Ben S. Bernanke said unemployment remains too high, the recovery in the U.S. economy isn’t assured and policy makers don’t rule out any further options to boost growth.

“It’s far too early to declare victory,” Bernanke said, according to a transcript of an interview with ABC News anchor Diane Sawyer provided by the network. “The recent news has been good. But I think we need to be cautious and make sure this is sustainable. And -- we haven’t quite yet got to the point where we can be completely confident that we’re on a track to full recovery.”

Asked if another round of quantitative easing, or large-scale bond purchases, remains “on the table,” the 58-year-old Fed chief said, “we don’t take any options off the table.” He added: “We have to be prepared to respond to however the economy evolves.”

The remarks, airing on “World News with Diane Sawyer” at 6:30 p.m. on the ABC Television Network, expand on a speech by Bernanke yesterday in Arlington, Virginia, in which he said the fall in the jobless rate to 8.3 percent may reflect “a reversal of the unusually large layoffs that occurred during late 2008 and over 2009.” Significant further improvement in reducing unemployment will probably require faster growth, he said.

Defending Bond Purchases

The interview is Bernanke’s first sit-down television appearance since comments by him on CBS’s Corp.’s “60 Minutes” in December 2010 in defense of the central bank’s decision the previous month to purchase $600 billion of government debt in a move dubbed QE2 for the second round of quantitative easing.

Bernanke said in the interview being broadcast today “it could still be a few more years” before unemployment returns to normal levels, and “until we get faster growth than we’ve been seeing, it is probably gonna take a while still.”

The Fed chairman declined to comment when asked if he would serve out his whole term until January 2014. “I’m not thinking about the future,” Bernanke said, adding he is focused on meeting the central bank’s mandate to ensure full employment and stable prices.

The Federal Open Market Committee in a March 13 meeting decided to keep policy unchanged and maintain the main interest rate close to zero at least through late 2014. Unemployment is still “elevated” even after recent improvements in the job market, the FOMC said in a statement. Richmond Fed President Jeffrey Lacker dissented because he doesn’t anticipate that economic conditions will warrant exceptionally low rates for so long, the statement said.

Conflicting Assessments

Bernanke’s other colleagues on the FOMC have offered conflicting assessments of the need for further monetary policy steps to boost the economy.

Boston Fed President Eric Rosengren said today that “should growth slow down more than is expected, more policy accommodation could be advisable.”

Chicago Fed President Charles Evans on March 22 went further, saying that “clearly, more accommodation would be appropriate” due to high unemployment.

In contrast, James Bullard, president of the St. Louis Fed, and Atlanta’s Dennis Lockhart said last week that the improving U.S. economy is reducing the need for additional easing. The Fed has held interest rates near zero since 2008 and purchased $2.3 trillion in bonds to spur growth after unemployment rose to as

Fisher, Accommodation

Dallas Fed President Richard Fisher said today in Choudrant, Louisiana, that “I don’t believe we need further accommodation.”

Fed presidents rotate voting on monetary policy with Lockhart voting this year, Bullard, Rosengren and Evans voting next year, and Fisher voting in 2014.

An improving job market has helped keep consumer confidence close to the highest level in a year in March as a growing number of Americans said they planned to buy cars, homes and appliances.

The Conference Board’s index was 70.2 this month, in line with the median forecast in a Bloomberg News survey, down from a revised 71.6 reading in February, according to the New York-based research group. Another report today showed home prices dropped at a slower pace in January, signaling stabilization in housing that may begin to brighten moods.

The best six months of job growth since 2006, unemployment at a three-year low, and stock-market gains are giving Americans the means to withstand higher costs at the gas pump. A pickup in buying plans this month shows a sustained optimism may keep driving consumer spending, which accounts for about 70 percent of the economy.

‘Big Concern’

In his interview today, Bernanke said that housing remains “a big concern for us,” and “we’re not really yet in a full-fledged housing recovery.”

Bernanke cited gasoline prices as a “moderate” risk to economic growth. Gas prices have risen to $3.90 a gallon as of yesterday from $3.28 at the end of 2011, according to the American Automobile Association.

“We’ll see a little bit higher inflation the next few months because of the higher gas prices,” Bernanke said. “We’ll see consumers with a little less income to spend” though not so much as to “stall the recovery,” he said.

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