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Wednesday, February 29, 2012

Bernanke: Policy to Remain Accomodative

Chairman Bernanke’s testimony today before the House Committee on Financial Services indicated that monetary policy is likely to remain accommodative, despite some falling unemployment and temporary inflation.

Bernanke noted we have seen “positive developments” in the labor market, with the decline in the unemployment rate over the past year, “somewhat more rapid than might have been expected.” Despite this the “job market remains far from normal.”

There are likely to be temporary inflationary pressures due to higher gasoline prices. Despite this, “longer-term inflation expectations…appear consistent with the view that inflation will remain subdued.”

Bernanke noted that “at present, with the unemployment rate elevated and the inflation outlook subdued, the committee judges that sustaining a highly accommodative stance for monetary policy is consistent with promoting both objectives.”

Bernanke also reiterated that “economic activity in 2012 will expand at or somewhat above the pace registered in the second half of last year.” Specifically, the FOMC forecasts have a central tendency of 2.2%- 2.7% real GDP growth over the next year.

Read Chairman Bernanke's testimony.

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