Federal Reserve Chairman Ben Bernanke on Monday predicted that “moderate” economic growth next year could be held back by high unemployment and a lack of lending by banks.
In a speech to the Economic Club of New York, Bernanke said there are clear signs that the economy has emerged from last year’s crisis and that the actions of Congress, the administration and the Federal Reserve have had a positive impact.
However, Bernanke admitted there was still much work for the Fed and Congress to do to revive consumer lending, address rising unemployment, improve the value of the dollar and prevent future banking crises.
“How the economy will evolve in 2010 and beyond is less certain,” he said. “My own view is that the recent pickup reflects more than purely temporary factors and that continued growth next year is likely. However, some important headwinds — in particular, constrained bank lending and a weak job market — likely will prevent the expansion from being as robust as we would hope.”
Bernanke made it clear the Fed would not raise interest rates, now near zero, for the foreseeable future, saying they would remain very low for an “extended” period of time.
Bernanke’s tempered optimism arrives at a crucial juncture in the country's economic recovery.
Bernanke admitted those concerns in his speech Monday, and he stressed the Fed was doing what it could to correct them. He noted the Federal Reserve was playing an active role in bolstering consumer lending, and he explained the board would continue to function as a “bank supervisor” to encourage the flow of credit.
Bernanke made it clear he does not expect unemployment, which hit 10.2 percent in October, to go down quickly.
“The best thing we can say about the labor market right now is that it may be getting worse more slowly,” said Bernanke, who noted the country would need to add many more jobs just to provide employment to those entering the labor market.
The comments could provide more of an impetus for lawmakers to move legislation providing incentives for companies that hire new workers.
President Barack ObamaBarack ObamaKey conservative rep on healthcare plan: 'Let’s get out those regulations’ Trump climate move risks unraveling Paris commitments White House staff to skip correspondents' dinner MORE has appointed Bernanke to another four-year term as Fed chairman, and the Senate is expected to vote on his confirmation before the end of January.
While Bernanke is expected to win confirmation, the Fed has seen its popularity wane with the crisis, and legislation to take away some of the Fed’s regulatory powers has been introduced by Senate Banking Committee Chairman Chris Dodd (D-Conn.).