Washington
15 July 2008
Federal Reserve Board Chairman Ben Bernanke says the U.S. economy isfacing numerous difficulties amid a continuing downturn in housing,high oil prices, and renewed turmoil in financial markets. VOA's BarryWood has more.
In an appearance before the Senate BankingCommittee, Bernanke made clear that monetary policy is aimed at keepingthe economy growing and fighting inflation. He gave no indication offuture moves in interest rates.
The central bank chief toldlawmakers the woes besetting the economy are more severe than they havebeen for several years, and as a result economic growth will be slowerthan earlier anticipated.
"Over the remainder of this yearoutput is likely to expand at a pace appreciably below its trend rate,primarily because of continued weakness in housing markets, elevatedenergy prices and weak credit conditions," said Ben Bernanke. "Growthis projected to pick up gradually over the next two years asresidential construction bottoms out and begins a slow recovery and ascredit conditions gradually improve."
Bernanke was asked aboutthe government's rescue of two federally chartered agencies that arethe biggest players in the residential mortgage market. He defendedthe plan to offer assistance to the agencies, known as Fannie Mae andFreddie Mac, and called for Congress to enact legislation that willstrengthen public oversight of both entities.
Bernanke said theeconomic outlook has downside risks mainly because of uncertainty aboutfuture oil prices, which are up 50 percent this year and 500 percentsince the beginning of the decade.
"Our best judgment is thatthis surge in prices has been driven predominately by strong growth inunderlying demand and tight supply conditions in global oil markets,"he said. "Over the past several years the world economy has expanded atis fastest pace in decades, leading to substantial increases in thedemand for oil."
Bernanke said a weak dollar may have contributed somewhat to the sharp rise in oil.
Meanwhile,the U.S. Labor Department reported soaring costs for gasoline and foodpushed producer prices up by 1.8 percent in June and 9.2 percent duringthe past 12 months, the biggest increase since 1981.
At the same time the dollar reached a record low against the euro, a currency used by 15 European Union countries.