Fed Chairman sees ‘slower than expected’ growth in US

Posted By on June 22, 2011

It should come as no surprise, but after Federal Reserve Chairman Ben Bernanke delivered his remarks on Wednesday saying the U.S. economy was recovering more slowly than expected, indices110622Wall Street had little interest in continuing to move indices positive. More than likely the fact that the Fed saw no reason to tighten money supply in this meeting (changing interest rates) highlighted their pessimism that we were going to see a recovery. Interestingly, the lack of comment or the fact that he didn’t any additional stimulus after QE2 ends June 30th did strengthen the U.S. dollar.

"In particular, consumers’ purchasing power has been damped by higher food and energy prices, and the aftermath of the tragic earthquake and tsunami in Japan has been associated with disruption in global supply chains," Mr. Bernanke said at a press conference.

Fed officials also said job-market indicators have been weaker than anticipated, compared with when they last met in April.

My take on this is somewhat positive as I agree with many business leaders that the Feds job is to control inflation and that they need to leave the economic recovery to business. Now if we could only keep politicians (and the thousands of lobbyists sent by special interest and businesses) from sticking their noses into business we would be all that much better off and might see a quicker recovery.

Ending a two-day meeting, the Fed repeated a pledge to keep interest rates at record lows near zero for "an extended period," a promise it’s made for more than two years.

Fed officials said in a statement that they think the main causes of the economy’s slowdown, such as high gas prices and supply disruptions from Japan’s disasters, are temporary. Once those problems subside, Fed officials said the economy should rebound.

Still, the statement stood in contrast to the Fed’s more upbeat view when officials last met eight weeks ago. At that time, the central bank said the job market was gradually improving.

The new statement acknowledged the slowdown that’s occurred over the past two months. The economy added just 54,000 jobs in May, far fewer than in the previous two months. Consumer spending has weakened, too.

The Fed said it would keep its holdings of Treasury bonds at current levels. That policy is intended to keep consumer and business loan rates at low levels to stimulate spending.

Though the central bank noted that inflation has risen, it expects those pressures to be temporary as well.

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Desultory - des-uhl-tawr-ee, -tohr-ee

  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
  2. digressing from or unconnected with the main subject; random: a desultory remark.
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