Bernanke: Economy Improves, Threats Loom

Federal Reserve Chairman Ben Bernanke told lawmakers Wednesday that the economy is improving, and the Fed plans to carry on with its policy of holding key interest rates low — at least for now.

In recent months, the economy has steadily shown signs of improvements: Unemployment rate has dropped for five consecutive months, and consumer confidence has been on the rise, posting its highest point in a year in February. Stocks recently have posted large gains.

But Bernanke cautioned threats remain to economic recovery, such as a still sluggish housing market, rising gas prices, and the European debt crisis.

“The recovery of the U.S. economy continues, but the pace of expansion has been uneven and modest by historical standards,” Bernanke told the House Financial Services Committee on Wednesday.

Bernanke did say that the Fed’s vow to keep interest rates low until late 2014 may need to be revisited if the economic outlook continues to improve. The Fed’s rare move has kept mortgage rates hovering at record lows in recent months.

"The policy is conditional," Bernanke told lawmakers. "It is based on what we know now."

Lawmakers and some economists have questioned the Fed’s move on keeping rates low until 2014, arguing it poses risks to inflation if the economy continues to improve. But the Fed has maintained its needed to aid economic recovery.

Source: “Bernanke Acknowledges Economy has Outperformed Fed’s Expectations; Markets See Less Stimulus,” Associated Press (Feb. 29, 2012) and “Federal Reserve Chairman Sees Modest Growth,” The New York Times (Feb. 29, 2012)