Federal Reserve Chairman Ben Bernanke has said that the Fed’s easy-money policy is still necessary, because the jobs market remains weak and inflation remains too low for comfort.
He also warned that the full impact on the economy of steep government spending cuts initiated in March was yet to be seen, underscoring the need for more Fed support.
“Both the employment side and the inflation side are saying that we need to be more accommodating,” he said. “ Put that all together, I think you can only conclude that highly accommodative monetary policy for the foreseeable future is what’s needed in the US economy.”
Bernanke said that the 7.6% unemployment rate, though far below its crisis peak, “if anything overstates the health of our labour markets.”
He pointed to the low overall participation rate in the job market, four years after the country emerged from a deep recession, and the high rate of long-term unemployment.