Washington — Federal Reserve Chairman Ben Bernanke says the U.S. economy is continuing to expand moderately, providing critical support for ongoing improvements in the labor market.
Bernanke addressed reporters following an April 25 meeting of the Federal Open Market Committee, the central bank’s policymaking arm.
“Most committee participants expect economic growth to remain moderate over coming quarters and then to pick up gradually,” the chairman said. The U.S. economic recovery faces head winds including weakness in the housing sector and strains in global financial markets.
Bernanke said labor market conditions have improved in recent months, with the unemployment rate having fallen nearly a percentage point since August.
“However, at 8.2 percent, the unemployment rate remains elevated,” Bernanke said, adding that the committee anticipates the unemployment rate will decline gradually during the next several years to reflect the moderate pace of economic growth.
Specifically, participants’ projections for the unemployment rate ranged from 7.8 percent to 8 percent for October to December this year, dropping to between 6.7 percent and 7.4 percent over the same quarter in 2014.
The committee said inflation has picked up somewhat in recent months, mainly reflecting higher gasoline prices. But Bernanke said the committee expects that effect to be temporary, with participants projecting inflation rates of between 1.9 percent and 2 percent for 2012 and dropping to 1.7 percent to 2 percent for 2014.
He said the committee, which includes five board members and 12 reserve bank presidents, decided to maintain a highly accommodative policy to foster continued growth while retaining price stability.
This policy includes keeping the federal funds rate, or the rate banks are charged for overnight loans, between 0 and 0.25 percent. The committee said economic conditions are likely to warrant continued low levels at least until late 2014.
The policymakers also agreed to continue to extend the average maturity of the Federal Reserve’s security holdings.
Additionally, they maintained a goal for inflation of no more than 2 percent. A higher inflation rate would reduce the public’s ability to make accurate long-term economic and financial decisions, Bernanke said, while a lower rate would elevate the risk of falling into deflation. He said the target should help foster price stability and control long-term interest rates, enhancing the committee’s ability to promote maximum employment.
Bernanke spoke following the annual International Monetary Fund and World Bank Spring Meetings in Washington. He said those talks, which brought together finance ministers and economic leaders from around the world, focused largely on strategies to support the global economic recovery.
The chairman said the Federal Reserve Board will continue to monitor economic conditions and carefully adjust its policies as needed.