From the Guardian:
Ben Bernanke criticises 'self-defeating' cuts
Federal Reserve chairman tells group of ibankers solution to dilemma is to recognise long-term nature of fiscal problems
Ben Bernanke: 'The solution to this dilemma, I believe, lies in recognising that our nation’s fiscal problems are inherently long-term in nature.' Photograph: Tami Chappell/Reuters
Federal Reserve chairman Ben Bernanke has weighed in on the fierce budget battle now gripping Washington, warning deep cuts could be "self-defeating" to the "still-fragile recovery".
Speaking to a group of international bankers in Atlanta, Bernanke said the recovery in the US economy is "uneven" and "frustratingly slow" but should pick up in the second half of 2011.
Bernanke said US interest rates would remain low for some time to come but the government's $600bn (£365bn) "quantitative easing" (QE2) stimulus plan would run out this month as planned.
Aggressive budget cuts "could be self-defeating if it were to undercut the still-fragile recovery," he said.
"The solution to this dilemma, I believe, lies in recognising that our nation's fiscal problems are inherently long-term in nature. Consequently, the appropriate response is to move quickly to enact a credible, long-term plan for fiscal consolidation," said Bernanke.
The recovery was clearly being held back by the troubled jobs and housing markets but there were indications that petrol prices would fall and the impact of Japan's nuclear disaster on manufacturing was on the wane, he said.
"Overall, the economic recovery appears to be continuing at a moderate pace, albeit at a rate that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed and underemployed workers."
A spate of weak economic data was capped by a report last week that showed the US added only 54,000 jobs in May, the fewest since September last year. The unemployment rate in May rose to 9.1%, from 9% in April. The parlous nature of the US jobs market was underlined once more on Tuesday as the labour department reported that businesses had fewer job openings in April with employers posting 3m ads for jobs in April, down from 3.1m in March.
"US economic growth so far this year looks to have been somewhat slower than expected," Bernanke said. "A number of indicators also suggest some loss in momentum in labour markets in recent weeks," he added.
"The housing sector typically plays an important role in economic recoveries; the depressed state of housing in the United States is a big reason that the current recovery is less vigorous than we would like," he said.
- guardian.co.uk © Guardian News and Media Limited 2011
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