Federal Reserve Chairman Ben Bernanke told an audience in Tokyo yesterday that the pace of economic recovery has been “frustratingly slow,” with the 7.8 unemployment rate “well above what we judge to be its long-run normal level.”
“The headwinds include the effects of deleveraging by households, the still-weak U.S. housing market, tight credit conditions in some sectors, spillovers from the situation in Europe, fiscal contraction at all levels of government, and concerns about the medium-term U.S. fiscal outlook,” Bernanke said.
Echoing the Obama campaign trail statement that the global economy is dragging down U.S. recovery, the chairman said “the soft tone of global activity is yet another headwind for the U.S. economy.”
Still, he cited the “disappointing progress in job markets” as a reason why the Federal Open Market Committee — which at its September meeting predicted a “moderate pace” of economic recovery “with the unemployment rate declining only gradually” — took “several important steps this year to provide additional policy accommodation.”
“As I have said many times, however, monetary policy is not a panacea. Although we expect our policies to provide meaningful help to the economy, the most effective approach would combine a range of economic policies and tackle longer-term fiscal and structural issues as well as the near-term shortfall in aggregate demand,” Bernanke said.
“Moreover, we recognize that unconventional monetary policies come with possible risks and costs; accordingly, the Federal Reserve has generally employed a high hurdle for using these tools and carefully weighs the costs and benefits of any proposed policy action.”