Bernanke was yapping away with reporters today, bragging about the “expected” action in the stock market while dissing inflation concerns and ignoring Fed expectations that did not happen such as falling treasury yields or improvements in housing.
The economy is poised to grow more rapidly this year, Federal Reserve Chairman Ben S. Bernanke said Thursday, dismissing fears that rising fuel prices will trigger broad-based inflation. But he stressed that it will still take several years before the unemployment rate comes down to normal levels.
Speaking at the National Press Club just before a rare question-and-answer period with journalists, Bernanke gave a mixed assessment of the nation’s economic prospects, according to a prepared text of his remarks. He made clear that the economy cannot get back on track until the job market improves.
Bernanke maintained his view that the Fed’s program of buying $600 billion in Treasurys to try to prop up growth, announced in November, is working: Stock prices have risen; the stock market has become less jumpy; companies are able to borrow money more cheaply; and inflation expectations have risen a bit. All were expected results, he said.
While Bernanke repeated recent comments that he and his Fed colleagues will review the Treasury purchase program regularly and adjust it as needed, he gave no hint that the Fed would either stop the program before its scheduled June end date or expand it beyond that time.
As he has in the past, the Fed chairman again warned that the United States is on an unsustainable fiscal course.
Quoting the economist Herbert Stein that “if something cannot go on forever, it will stop,” Bernanke said that the federal government must stabilize its budget. The question, he said, “is whether these adjustment will take place through a … process that weighs priorities and gives people adequate time to adjust to changes in government programs or tax policies, or whether [they] will be a rapid and painful response to a looming or actual fiscal crisis.”
I suggest Congress should listen to one of the few things Bernanke has ever said that made any sense. The correct Congressional response is to take Bernanke at his word and not raise the debt ceiling.
Mike “Mish” Shedlock