Bernanke Unshaken By Bad Economic News

Fed Chairman Says High Unemployment, Skyrocketing Gas Prices Belie The Economy's Strength

(AP)  Despite a recent spike in the unemployment rate, the danger that the U.S. economy has fallen into a "substantial downturn" appears to have waned, Federal Reserve Chairman Ben Bernanke said Monday.

Addressing a Fed conference in Chatham, Massachusetts, on Monday night, Bernanke said a government report last week showing the unemployment rate rising from 5 percent in April to 5.5 percent in May - the biggest one-month jump in two decades - was "unwelcome." However, the Fed chief said other forces should "provide some offset to the headwinds that still face the economy."

The Fed's powerful doses of interest rate cuts, the government's $168 billion stimulus package, further progress in the repair of problems in financial and credit markets, a gradual ebbing of the drag from the deep housing slump and still solid demand from abroad for U.S. exports should help the economy over the remainder of this year, he said.

Although economic activity is "likely to be weak" during the current April-to-June quarter, Bernanke said "the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so."

Last Friday fears were rekindled that the country could be headed for a deep recession after the unemployment rate zoomed and oil prices registered their biggest single-day leap.

However, Bernanke said, "Recent incoming data, taken as a whole, have affected the outlook for economic activity and employment only modestly."

Still, soaring energy prices are a double-edged sword for the country. Oil prices closed Monday at $134.35 a barrel, down from last week's high of $139.12 a barrel. They risk putting a further damper on growth as well as spreading inflation through the economy, Bernanke said.

"Inflation has remained high," largely reflecting sharp increases in the prices of globally traded commodities, Bernanke said. "The latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations," he said.

The Fed is paying close attention to the extent to which consumers, investors and businesses believe prices will rise in the future, he said. If consumers, investors and businesses believe inflation will continue to go up, they will change their behavior in ways that aggravate inflation, turning it into a self-fulfilling prophecy.

The Fed "will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as well as for inflation," Bernanke said.

Bernanke spoke Monday evening to a conference on understanding inflation and the implications for Fed policymakers in setting interest rates. The forum was sponsored by the Federal Reserve Bank of Boston. His comments on the economy's outlook were fairly brief and were part of a larger, mostly academic speech.

Last week, Bernanke sent his strongest signal yet that the Fed's rate-cutting campaign was probably over for now because of growing concerns that soaring oil and other commodity prices - along with a weakened dollar - are aggravating inflation.

To help brace the economy, the Fed dropped rates in late April to 2 percent, a nearly four-year low, continuing a rate-cutting campaign that started last September.


Many economists believe the Fed will hold rates steady at its next meeting on June 24-25 and probably through much, if not all, of this year. However, some believe inflation could flare up and force the Fed to begin boosting rates later this year or next year.

Inflation forecasting is important to Fed policymakers when determining the best course on interest rates. Even with extensive research over the years, much remains to be learned about both inflation forecasting and inflation control, Bernanke said. And there are areas where additional research could prove helpful.

Policymakers and analysts often have relied on information from commodity futures markets to help shape inflation forecasts, Bernanke said. In recent years, though, information from futures markets has "underpredicted commodity price increases ... leading to corresponding underpredictions of overall inflation," he said. The "poor recent record" on that front raises the question of whether policymakers should continue to use this source of information and, if so, how, Bernanke said.

Despite the recent record, Bernanke said he didn't think it was reasonable to ignore information about supply and demand culled by futures markets. However, it does seem reasonable, he said, to treat such information as highly uncertain.

Working to make economic data timelier and more accurate also would be useful to policymakers trying to divine inflation's direction. Moreover, it would also be helpful for policymakers to know more about how people's inflation expectations are influenced by Fed interest rate actions, Fed communications and economic developments such as oil price shocks.

"Much evidence suggests that expectations have become better anchored than they were a few decades ago, but that they nonetheless remain imperfectly anchored," Bernanke said.

[Michael Arnold]

He''s PAID to lie.

[ontheleft]

''the danger that the U.S. economy has fallen into a "substantial downturn" appears to have waned''

No, the downturn is just beginning. It is just starting to hit the labor market and it will snowball from there. Things are going to get worse before they get better.

[kennergirl]

Please let me add my omitted word.


Thank God his reign is almost over!

There I said it. Thank you

[kennergirl]

Milk at $3.70 a gallon? I pay $4.85. A dozen of eggs is at least $1.99 which is ridiculous. Bush thinks its okay to pump billions of dollars to the Middle East and Africa when his own people are starting to struggle, stretching the all mighty dollar to fill up their cars and their refridgerators. Thank God his reign is almost.

Bernake can''t be serious saying that the worst is over. He''s got to think we are all idiots or sheep.

[walt1944-2009]

The "HEAD of the FED" has stated he is not concerned about the rise in gas prices (along with everything else!) and the rise in unemployment (the ACTUAL rise must be much higher!) and believes that the worst is over. In this regard, the "HEAD of the FED" sounds like a parrot belonging to the Great Emperor Bush II who has been insisting for the past 9 months that we are NOT in a recession, just a DOWNTURN!

All of this, while the Federal Reserve continues to print more worthless money to "stimulate" the economy! Any economist worth the name will tell you it is NOT a good idea to keep printing more money when you don''t have the "hard currency" (gold, silver, platinum, even COPPER) to back it up! The more money you put into the economy, the more worthless it becomes, which is why gas is $4.50/gallon, milk $3.70/gallon, and bread $2.50/loaf and all going UP!

Let "Bagdad John McBush" McCain run the country, a dodo who admits he knows nothing about economics, only about WAR, and see how quick it will be before it takes a bucket full of $100 bills to buy a gallon of milk!

SIG HEIL, BUSH!!!!!
sig heil, DEFINITELY MORE OF THE SAME, McCain!!!!

[gkc99]

Americans don''t save enough!

But keep cutting those interest rates to make sure they save even less!

Smart.

[matisyahu3]

If you don''t know economics then you have no room to speak. I''m a liberal but I would say that Bernanke has done exceptionally well these past few months since he had some bumps when he came in.

The FED needed to print money people!!! Banks were afraid to lend money out to people who needed it because they got rear ended before. Therefore you introduce more money into the system to lower the interest rates banks have to pay for borrowing that same money.

As for him hurting, everybody is hurting. Set financially? I guarantee you he has money in the market and it has been a rough year for him also. We aren''t anywhere near a recession but this certainly is a tough time. Just wait for housing to flatten itself out and wait for oil to do the same.

[jerr11]

Bernanke has been printing money in the FED basement for years.

That''s why the dollar is worth only 60 cents what it was before Bush took over.

Bernanke and the neocons are stealing from all Americans 40 cents in every dollar.

How, you might ask?

They print money, the dollar loses value.

We lose 40 cents for every dollar we earn. They''re flush with newly minted cash!

That''s the neocons'' way of taxation!

[irliberal]

Bernake''s unshaken eh? I keep waiting for him to appear in front of a "Mission Accomplished" banner.

Perhaps the shackles they''re forging for Shrub and Darth will fit Benuseless as well.

[wlmrtpatriot]

Bernake is an idiot? You can''t be serious. Bernanke runs the company store and we owe our souls to it. You people still crezzy over here. :/

[randynason]

Bernanke Unshaken By Bad Economic News

Well, of course he is! He is set financially and so busy kneeling in front of George W. and blowing him that he can barely acknowlege the economy, at all. He is paid to put lipstick on the pig, frankly. And, I say that with the upmost of humility because unlike Bernanke, I love little piggies. They have more decency and caring, than he.

[williamfold]

of course he''s unshaken by bad economic news. he''s rich you moron!

[shanewa01]

He is paid to put lipstick on the pig, frankly. And, I say that with the upmost of humility because unlike Bernanke, I love little piggies. They have more decency and caring, than he
========================
Shane
<a href="http://mls.fastrealestate.net" rel="dofollow">MLS

[okie1717]

I "One-American"! He keeps referring to liberals as if they are foreign infiltrators. He doesn''t really have a valid point nor are his statements based on rational thought. The liberals are trying to destroy the U.S. economy so they can point the finger at Bush!? Yeah right! The liberals don''t have children or mortgages or jobs etc. They don''t fill their tanks with $4 per gallon gas, they don''t eat or even need a vibrant economy. They want to destroy it all so they can point the finge at Bush! It''s a big conspiracy! Most voters of uniformed, as is evident. It is the Republicans in Oklahoma that filed and injuntion to protect businesses that hire illegals. I have been involved in politics since I could go door-to-door at 8 years old. I would love to engage in an educated debate with this guy. I bet he''s been abducted by aliens too!

[okie1717]

For you Bush fans out there, Pres. Bush will go down as the worst President in U.S. history. Remember, the Republicans had control of all three branches for several years and we are now seeing the effects. Republican Senator Jim Inhofe says global warming is the biggest fraud ever perpetrated on the American people. This is the way these guys think people! The far left and far right want us to argue amongst ourselves. The middle is where we come together and make progress. They do not care about the average American folks! Get a clue. You can argue all you want about liberals and conservatives but at the end of the day, they only care about themselves. It isn''t going to get any better any time soon.

[vastr-wcon]

.
Further proof that bailout bernanke will say and do anything to keep the wall street bubble inflated. Meanwhile, main street remains in a catastrophe.


/

[gce65]

Why would Bernanke be shaken about bad economic news? It''s not his job on the line. And even if it was, he still makes plenty of money.

[floydzeppl]

Ben Bernanke - Let them eat cake.

[davidlar2]

Bernanke is an idiot who caused all of these problems by lowering interest rates and increasing the money supply too much.

[haoli25]

Bernanke must be have serious investments in Saudi Arabia and Dubai.

[irliberal]

Back from the reset. Nope, sorry. Same thing. Amazing, isn''t it?