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The economy is growing slowly and job creation is not happening quickly enough, but we're not headed for disaster either. That was the message, yesterday, from Federal Reserve Chairman Ben Bernanke. He gave a six month update to Congress. As NPR's Tamara Keith reports, Bernanke's visit to the hill was low key, kind of like the recovery.
TAMARA KEITH: When the Fed chairman last delivered this report six months ago, the recovery was just getting going, things were looking good. But lately, there's been a whole lot of mediocre economic news, which is why Ben Bernanke said this.
Mr. BEN BERNANKE (Federal Reserve chairman): We also recognize that the economic outlook remains unusually uncertain.
KEITH: Unusually uncertain. Still, Bernanke is repeating a refrain we've been hearing for months.
Mr. BERNANKE: My colleagues on the Federal Market Committee and I, expect continued moderate growth, a gradual decline in the unemployment rate and subdued inflation over the next several years.
KEITH: When it came time for questions, Republican Senator Bob Corker from Tennessee, asked if Bernanke and his colleagues had considered the possibility of the economy falling back into recession.
Senator BOB CORKER (Republican, Tennessee): Do you discuss much, in your meetings, the probability of a double dip. And can you give us some sense as the future there?
Mr. BERNANKE: Well, we certainly try to talk about all contingencies, and the committee has identified some downside risks.
KEITH: Those downside risks include trouble small businesses have had getting credit and the high level of unemployment, which hurts consumer confidence -which in turn, makes people unwilling to spend.
Mr. BERNANKE: But I'd like to emphasize that our forecast, our expectation, is still for a moderate recovery; which will, over time, bring down the unemployment rate. So that's still our main scenario.
KEITH: Bernanke made it clear the Fed doesn't plan to raise interest rates anytime soon. They're about as low as they can go at this point. And given all that uncertainty and downside risk, inflation is hardly a concern.
If this slow down in the recovery gets worse, Bernanke said the Fed is prepared to get creative. Kentucky Republican Jim Bunning was skeptical.
Senator JIM BUNNING (Republican, Kentucky): Are you out of bullets?
Mr. BERNANKE: Well, I don't think so.
KEITH: What the Fed has left in the chamber is something known as quantitative easing.
Mr. VINCENT REINHART (American Enterprise Institute): So what does the Fed have left? What the Fed can do, has done before and can do again, is buy stuff.
KEITH: Vincent Reinhart is the resident scholar at the American Enterprise Institute. Before that he worked at the Federal Reserve for about 25 years, and even wrote papers with Chairman Bernanke about that very strategy.
Mr. REINHART: The central bank has a big balance sheet and it can make it bigger. The Federal Reserve can buy assets.
KEITH: Like mortgage-backed securities or treasury securities.
Mr. REINHART: The Federal Reserve can buy different assets. So in that sense, since he can resort to creating reserves and purchasing assets, he does have some bullets left.
KEITH: Committee members didn't restrict their questions to monetary policy, though. They tried to get the Fed chairman to weigh in on all kinds of highly politicized issues, like the pending expiration of the Bush-era tax cuts and the balance between the deficit and economic stimulus. It seemed like Bernanke did his best not to give anyone, Democrats or Republicans, the ammunition they were looking for.
Mr. BERNANKE: I don't think it's really my place to tell Congress which specific tax and spending policies to choose. I prefer to address the broader trajectory of fiscal stimulus.
KEITH: Though he did say, in the long term, big deficits are bad.
Tamara Keith, NPR News, Washington.
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