Bernanke Expects Moderate Growth of the U.S. Economy in 2010

The U.S. economy will continue to grow in 2010, and the underlying strength of the world’s largest economy will help keep the dollar strong, said Ben Bernanke, Chairman of the Federal Reserve (FED), the central bank of the United States, on Monday.

Bernanke also warned that weaknesses in the labor market and restrictive bank lending will prevent the economy from expanding as strongly as the central bank would like. "I expect moderate economic growth to continue next year. Demand is showing signs of strengthening, supported by an overall improvement in financial conditions," Bernanke said in a prepared speech he will deliver on Monday at the Economic Club in New York. Bernanke’s speech was broadcast by the public television channel C-SPAN on its website.

The FED Chairman also spoke about the U.S. dollar, which he rarely does. The dollar has recently lost value as conditions in financial markets have improved and global economic activity has increased. "Our commitment to fulfilling our dual mandate of maximizing employment and price stability, along with the underlying strength of the U.S. economy, will help ensure that the dollar remains strong and a source of global financial stability," Bernanke said, emphasizing that the FED will continue to closely monitor the value of the dollar.

In his first speech since the FED decided earlier this month to keep interest rates at a record low, Bernanke stated that employment is likely to remain scarce and inflation low for some time. The FED on November 4 maintained its benchmark interest rate at a record low of 0 to 0.25 percent, citing the slow recovery of the economy as the reason. The central bank indicated that it expects to keep interest rates near zero for an "extended period," faced with high unemployment and low inflation.

For the first time, the FED committee that sets interest rates specified three key indicators it will monitor when determining rates: unemployment, core inflation, and inflation expectations. "Both the reduction in jobs and the increase in the unemployment rate have been more severe than in any other recession since World War II," Bernanke warned. The U.S. economy is slowly recovering from its worst recession since the Great Depression of the 1930s. Although the economy grew in the third quarter for the first time in over a year, the recovery remains weak, with the highest unemployment in the last 26 years at 10.2 percent in October.  (H)