Bernanke says U.S. needs faster growth

Mon Mar 26, 2012 11:36am EDT
 
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By Pedro da Costa and Jason Lange

WASHINGTON (Reuters) - The U.S. economy needs to grow more quickly to bring down the unemployment rate further, Federal Reserve Chairman Ben Bernanke said on Monday, defending the central bank's policy of very low interest rates.

While he offered no indication that the Fed is keen to embark on a third round of bond purchases, Bernanke also made clear the Fed is in no rush to reverse course after responding aggressively to a deep recession.

Bernanke said the recent decline in the jobless rate, which dropped to 8.3 percent in February from 9.1 percent last summer, was "somewhat out of sync" with the rather modest pace of economic growth.

"To the extent that this reversal has been complete, further significant improvements in the unemployment rate will likely require a more rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies," Bernanke told the National Association for Business Economics.

U.S. gross domestic product grew 3 percent in the fourth quarter, but is expected to have slowed to just below 2 percent in the first three months of this year. For all of last year, it grew only 1.7 percent, which would normally be too slow to move the unemployment rate lower.

Bernanke said the recent drop in the jobless rate could reflect an effort by businesses to recalibrate their payrolls after unusually heavy job cuts during the recession. If this is the case, he said, progress may stall.

"Reading between the lines, it sounds like he's pushing the ball forward toward having a discussion about doing more (stimulus)," said Chris Rupkey, economist at Bank of Tokyo-Mitsubishi.

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Federal Reserve Board Chairman Ben Bernanke addresses the National Association for Business Economics Policy Conference in Alexandria, Virginia March 26, 2012. The U.S. economy needs to grow more quickly if it is to produce enough jobs to bring down the unemployment rate, Bernanke said on Monday, tamping down expectations of a quick reversal of monetary easing. REUTERS/Gary Cameron