ST : Too soon to declare lasting recovery

Dec 8, 2009
Too soon to declare lasting recovery

WASHINGTON - FEDERAL Reserve Chairman Ben Bernanke warned Monday that it is too soon to know whether the economic recovery will last and again pledged to hold rates at record-low levels for an 'extended period.'

The Fed chief's speech to the Economic Club of Washington made clear he thinks the economy will struggle even as it recovers from the recession. He said the economy confronts 'formidable headwinds' - including a weak job market, cautious consumers and tight credit. Those forces 'seem likely to keep the pace of expansion moderate,' he said.

The central bank has leeway to keep rates low because inflation is under control and is expected to stay tame because of the economy's weakness. Some private forecasters even fear that the recovery could fizzle late next year as government stimulus fades.

Asked about prospects for such a 'double dip' recession, Mr Bernanke said he could not guarantee it won't happen. He stuck with his forecast for a moderate recovery but said a 'vigorous snapback' is less likely.

Mr Bernanke said he expects 'modest' economic growth next year. That should help push down the nation's unemployment rate - now at 10 per cent - 'but at a pace slower than we would like,' he acknowledged.

Under one Fed forecast released last month, the jobless rate would remain high next year - ranging from 9.3 to 9.7 per cent. The Fed has warned that it could take five or six years for the job market to return to normal. -- AP