Posted by: youngragingbull | May 22, 2013

Fed’s Bernanke cautious of pulling stimulus

U.S. Federal Reserve chairman Ben Bernanke spoke to members of Congress and the Senate on Wednesday about the central bank’s enormous stimulus programs – advising lawmakers that the economy and labor market are both too weak to consider pulling the plug.

Bernanke said the U.S. economy is on track to grow moderately, and unemployment is trending around 7.5 percent, a recent low. However, the data still is not indicative of a strong, healthy economy, as seen prior to the start of the Great Recession.

That’s why bowing to pressure to remove some of the Fed’s $85 billion a month stimulus programs would “carry a substantial risk of slowing or ending the economic recovery,” he said.

He reminded lawmakers that higher taxes and deep federal spending cuts are expected to slow economic growth slightly this year, meaning it’s unlikely that the Fed will reduce stimulus programs until a substantial improvement in economic data is seen, particularly in the labor market.

Bernanke said the Fed could take a “step down” if the job market shows “real and sustainable progress” over the next few meetings of the Federal Reserve board of governors.

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