The Federal Reserve chairman,Ben S Bernanke,said Friday that the economy was recovering and the nations long-term prospects remained strong,an upbeat assessment that offered little indication of any plans for additional measures to bolster short-term growth.
Bernankes much-anticipated remarks follow the Feds announcement earlier this month that it intended to hold short-term interest rates near zero until at least the middle of 2013,a reflection of its view that growth will not be fast enough during that period to drive up wages and prices.
With respect to longer-run prospects,however,my own view is more optimistic, Bernanke said in his prepared remarks. The growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years.
Bernanke was careful to note that the nation faces significant challenges,including high unemployment and an unsustainable federal debt. But the speech,delivered at a policy conference held each August in Grand Teton National Park,marked a return to the Feds position earlier this year that the Fed has done most of what it can,and that the rest of the government must do more.
Indeed,Bernanke devoted much of his speech to fiscal policy,rather than the monetary policy that is the Feds primary responsibility. And he offered an unusual critique of the governments handling of those issues.
The country would be well-served by a better process for making fiscal decisions, he said,noting that the political battle over raising the debt-ceiling had disrupted the financial markets and probably the economy as well.
Bernanke suggested a different process,involving clear and transparent budget goals,together with budget mechanisms to establish the credibility of these goals.