WASHINGTON — Federal Reserve Chairman Ben Bernanke said Wednesday that the US economy was recovering more slowly than expected, but central bank officials gave no indication they intend to take new steps to boost growth and jobs.
After a meeting of the Fed’s decision-making body, officials said they were sticking with plans to end the purchase of $600 billion of US Treasurys on June 30, as scheduled, and would keep short-term interest rates near zero for at least several more months.
The recovery is continuing at a moderate pace, though “somewhat more slowly” than previously expected, officials said in a statement following the Federal Open Market Committee meeting.
“In particular, consumers’ purchasing power has been damped by higher food and energy prices, and the aftermath of the tragic earthquake and tsunami in Japan has been associated with disruption in global supply chains,” Bernanke said at a press conference.
Fed officials also said job-market indicators have been weaker than anticipated, compared with when they last met in April.
In updated forecasts, Fed officials lowered their growth forecasts and predicted core inflation would remain higher than previously thought. The economy is now expected to expand at a rate of around 2.7 percent to 2.9 percent this year and 3.3 percent to 3.7 percent in 2012.
Just a few weeks ago, Fed officials were focused on plans for exiting from their easy-money policies. Discussions at the April meeting focused on strategies for reducing the securities portfolio and eventually raising short-term interest rates. But a slew of discouraging economic data convinced many officials they need to stay on hold as they assess whether the bumps to growth and inflation seen in recent months are transitory, as officials believe.
Fed officials expect the economy to pick up speed again starting from the second half, helping the jobs market to improve slowly, and they also see inflation slowing as commodity prices retreat.
“Inflation has moved up recently, but the [Fed] anticipates that inflation will subside… as the effects of past energy and other commodity price increases dissipate,” the central bank said.
Bernanke has recently shown little appetite for easing policy further. At his first-ever press conference after the April FOMC meeting, he suggested the bar for doing more bond purchases was high given that inflation risks have risen. In his latest speech June 7, he noted monetary policy “cannot be a panacea”.
At Wednesday’s press conference, Bernanke said that US direct exposure to a possible default by Greece on its debt was “small” but said the risk of contagion was significant, were one to occur.
“If there were a failure to resolve that situation, it would pose threats to the European financial system, global financial system and European political unity,” Bernanke said.
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