US monetary policy contain int’l implications
Mr Ben S Bernanke, Chairman of the Board of Governors of the Federal Reserve System addressing at a high-level seminar “Challenges of the global financial system: risks and governance under evolving globalization”, sponsored by the Bank of Japan and the International Monetary Fund said it is a pleasure to be here. This morning I will first briefly review the U.S. and global economic outlook.
I will then discuss the basic rationale underlying the Federal Reserve’s recent policy decisions and place these actions in an international context.
The U.S. economy has faced significant headwinds, and, although the economy has been expanding since mid-2009, the pace of our recovery has been frustratingly slow. 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. In this environment, households and businesses have been quite cautious in increasing spending. Accordingly, the pace of economic growth has been insufficient to support significant improvement in the job market; indeed, the unemployment rate, at 7.8 percent, is well above what we judge to be its long-run normal level. With large and persistent margins of resource slack, U.S. inflation has generally been subdued despite periodic fluctuations.