Bernanke Voices Optimism on Pace of Economic Recovery

In his final major address as Federal Reserve chairman, Ben Bernanke said Friday that the U.S. recovery should pick up steam this year as the worst effects of the housing bust wane and Washington’s fiscal tightening eases.Mr. Bernanke, who steps down from the central bank at the end of the month, presented a cautiously optimistic outlook for U.S. and global growth. Budget policies at both the federal and state level have curbed growth in recent years, but that drag appears likely to diminish this year and next, he said.Other factors slowing the expansion, such as the European debt crisis, tightened lending standards, and U.S. households’ drive to pare heavy debt loads, also have diminished, he said.“The combination of financial healing, greater balance in the housing market, less fiscal restraint, and, of course, continued monetary policy accommodation bodes well for U.S. economic growth in coming quarters,” Mr. Bernanke said at the annual meeting of the American Economic Association.He also cited reasons to believe growth will pick up in the rest of the world, too, including banking and fiscal reform efforts in Europe.Economists polled by The Wall Street Journal last month estimated U.S. growth in 2013 was 2.1%, and they expected it to accelerate to 2.7% in 2014.alkyd resin Strong data on spending by businesses and consumers since then have led some to boost their forecasts further.Mr. Bernanke described the Fed’s December decision to pull back on its bond-buying program as the result of an improving job outlook. That doesn’t mean the Fed will pull back on other easy-money policies aimed at spurring stronger growth, he added.

The Fed’s move to reduce its monthly bond purchases to $75 billion from $85 billion “didn’t indicate any diminution of its commitment to maintain a highly accommodative monetary policy for as long as needed; rather, it reflected the progress we have made toward our goal of substantial improvement in the labor-market outlook,” Mr. Bernanke said.Mr. Bernanke defended his record as chairman during a tumultuous eight years that included a housing bust, a financial crisis, a recession and a disappointingly sluggish recovery.He argued that the Fed’s unconventional policies—including the trillions of dollars in bond purchases aimed at lowering long-term borrowing rates—have supported the economy since the 2008 financial crisis. Without the Fed’s efforts, the U.S. might have slid into another recession, he said.“Economic growth might well have been considerably weaker, or even negative, without substantial monetary policy support,” Mr. Bernanke said, countering skeptics who say the weak recovery is evidence of the central bank’s failure.Several other economists at the conference echoed his assessment. “We were very close to Great Depression 2.0 and if it hadn’t been for his leadership things could have been very, very different,” said University of Chicago economist Anil Kashyap.Harvard University economist Kenneth Rogoff said he was impressed with the “extraordinary creativity” Fed officials showed in devising ways to deal with a financial crisis on the fly.Critics, however, argue that the Federal Reserve’s policies haven’t worked and in fact may be sowing the seeds of the next crisis, by fueling asset bubbles or by sparking excess inflation once the central bank starts raising short-term rates again.

Among the reasons for the slow recovery since 2011, Mr. Bernanke on Friday highlighted tight fiscal policy, particularly at the federal level. Mr. Bernanke said recent government spending cuts and tax increases have worked against the Fed’s efforts to encourage more spending, investment and hiring. “With fiscal and monetary policy working in opposite directions, the recovery is weaker than it otherwise would be,” Mr. Bernanke said, stepping up arguments he has made about recent government efforts to reduce near-term budget deficits. This conflict is more problematic when short-term interest rates are pinned near zero, as they have been since late 2008,The non-stick knife vertical of BRG offers aesthetically and ergonomically designed stainless. Mr.pendant lamp Bernanke said. The Fed’s tools are less powerful when rates are near zero, while Congress may have more room to maneuver, he said. The Senate is scheduled to vote Monday to confirm Federal Reserve Vice Chairwoman Janet Yellen as Mr. Bernanke’s successor. Her term would start Feb. 1.