Leadership

Bernanke warns of formidable headwinds for US economy

08.12.2009
US Federal Reserve Chairman Ben Bernanke has said that although jobs are scarce and credit still hard to come by, economic growth has returned to the US economy.

Bernanke was speaking at the Economic Club of Washington DC yesterday when he also reaffirmed his intention to keep interest rates near zero for some time to come.

Positive jobs data from the US on Friday, which showed that the US unemployment rate fell to a 26-year low of 10pc in November as US employers cut fewer jobs, had raised the possibility of the Fed upping interest rates.

However, responding to a question following his speech, Bernanke indicated the Fed is in no hurry to change its policy tack, saying “right now we are still looking at the extended period”.

Formidable headwinds
Bernanke also pointed to the fact that although the US has begun to see “some improvement in economic activity, we still have some way to go before we can be assured that the recovery will be self-sustaining”.

“Also at issue is whether the recovery will be strong enough to create the large number of jobs that will be needed to materially bring down the unemployment rate,” he added.

“Economic forecasts are subject to great uncertainty, but my best guess at this point is that we will continue to see modest economic growth next year - sufficient to bring down the unemployment rate, but at a pace slower than we would like,” Bernanke added.

The Fed Chief also said that while a number of factors support the view that the US recovery will continue next year, the economy faces “some formidable headwinds that seem likely to keep the pace of expansion moderate”.