Bernanke’s prepared testimony to Senate panel

WASHINGTON (BestGrowthStock) – The following are highlights from Federal Reserve Chairman Ben Bernanke’s prepared testimony on Fed policy and the U.S. economy to the Senate Banking Committee on Wednesday.

HIGHLIGHTS

BERNANKE ON FURTHER POLICY ACTIONS: “Of course, even as the Federal Reserve continues prudent planning for the ultimate withdrawal of extraordinary monetary policy accommodation, we also recognize that the economic outlook remains unusually uncertain. We will continue to carefully assess ongoing financial and economic developments, and we remain prepared to take further policy actions as needed to foster a return to full utilization of our nation’s productive potential in a context of price stability.”

BERNANKE ON ECONOMIC OUTLOOK: “My colleagues on the Federal Open Market Committee (FOMC) and I expect continued moderate growth, a gradual decline in the unemployment rate, and subdued inflation over the next several years.”

BERNANKE ON SOURCES OF GROWTH: “The economic expansion that began in the middle of last year is proceeding at a moderate pace, supported by stimulative monetary and fiscal policies. Although fiscal policy and inventory restocking will likely be providing less impetus to the recovery than they have in recent quarters, rising demand from households and businesses should help sustain growth.”

BERNANKE ON JOB MARKET: “In all likelihood, a significant amount of time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009.”

BERNANKE ON ‘EXTENDED PERIOD’: “As indicated in the statement released after the June meeting, the FOMC continues to anticipate that economic conditions — including low rates of resource utilization, subdued inflation trends, and stable inflation expectations — are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

BERNANKE ON EXIT STRATEGY: “When that time comes, the Federal Reserve will act to increase short-term interest rates by raising the interest rate it pays on reserve balances that depository institutions hold at Federal Reserve Banks. To tighten the linkage between the interest rate paid on reserves and other short-term market interest rates, the Federal Reserve may also drain reserves from the banking system.”

BERNANKE ON REGULATORY REFORM: “That legislation represents significant progress toward reducing the likelihood of future financial crises and strengthening the capacity of financial regulators to respond to risks that may emerge.”

“Much work remains to be done, both to implement through regulation the extensive provisions of the new legislation and to develop the macroprudential approach called for by the Congress. However, I believe that the legislation, together with stronger regulatory standards for bank capital and liquidity now being developed, will place our financial system on a sounder foundation and minimize the risk of a repetition of the devastating events of the past three years.”

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Bernanke’s prepared testimony to Senate panel