I tried watching this on TV but watching the blowhards in Congress incessantly drone on in sound bites like “rainman” just is too much for a human to be expected to bear. I can’t be expected to “take one for the team” every time these guys decide to put on the dog and pony show.
That being said, I decided to read in quiet…
Here is the outlook:
“Overall, the near-term economic outlook has weakened relative to the projections released by the Federal Open Market Committee (FOMC) at the end of January. It now appears likely that real gross domestic product (GDP) will not grow much, if at all, over the first half of 2008 and could even contract slightly. We expect economic activity to strengthen in the second half of the year, in part as the result of stimulative monetary and fiscal policies; and growth is expected to proceed at or a little above its sustainable pace in 2009, bolstered by a stabilization of housing activity, albeit at low levels, and gradually improving financial conditions. However, in light of the recent turbulence in financial markets, the uncertainty attending this forecast is quite high and the risks remain to the downside.”
“Inflation has also been a source of concern. The price index for personal consumption expenditures rose 3.4 percent over the twelve months ending in February, up from 2.3 percent over the preceding twelve-month period. To a large extent, this pickup in inflation has been the result of sharp increases in the prices of crude oil, agricultural products, and other globally traded commodities. Additionally, the decline in the foreign exchange value of the dollar has boosted some non-commodity import prices and thus contributed to inflation. However, the so-called core rate of inflation–that is, inflation excluding food and energy prices–has edged down recently after firming somewhat late last year.”
“We expect inflation to moderate in coming quarters. That expectation is based, in part, on futures markets’ indications of a leveling out of prices for oil and other commodities, and it is consistent with our projection that global growth–and thus the demand for commodities–will slow somewhat during this period. And, as I noted, we project an easing of pressures on resource utilization. However, some indicators of inflation expectations have risen, and, overall, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully in the months ahead.”
This is the first time in recent memory I can recall his mentioning of the “exchange rate of the dollar” in testimony as being an issue. If nothing else, it does show that the issue is not being ignored and Bernanke does recognize that perhaps the single best tool he has against inflation currently is to take actions that inflate the value of the dollar.
He finished by saying:
“Clearly, the U.S. economy is going through a very difficult period. But among the great strengths of our economy is its ability to adapt and to respond to diverse challenges. Much necessary economic and financial adjustment has already taken place, and monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year. I remain confident in our economy’s long-term prospects.”
None of this is really earth shattering stuff. The dollar mention was the most significant for me, although I have yet to hear it discussed by thew talking heads on TV. It is too bad because the Q&A in an election year is always a “circus of irrelevance” when it comes to the substance of the questions. Perhaps though the speech was rather benign because, well, that is the current environment out there?
I think one would be real hard pressed to think we have not stabilized and most of the bad news is now old news and what matters most is now this summer and fall.
That being said, if we do accelerate after this winter in the second half, Bernanke ought to get a bust on Capital Hill after what he just navigated the world through…
Review the whole text here:
Disclosure (“none” means no position):Long Bernanke
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One reply on “Bernanke's Testimony to Congress”
lol – a minor rally before the storm is all. Main street is still bleeding. Recessionary recoveries lately have been increasingly quick, but these aren’t normal times. Don’t expect growth to occur at all in 2008, we may be in for 4 quarters of declining GDP here, these markets are going to get hit – hard – soon.
JD