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Central Bank's Bernanke Upbeat about US Economy


Federal Reserve Board Chairman Ben Bernanke told a Senate committee Wednesday that, while U.S. economic growth is moderating, inflationary pressures have receded. VOA's Barry Wood reports the central banker's remarks triggered strong advance on Wall Street.

Share prices shot up primarily because market participants believe interest rates will hold steady and not have to rise to contain inflationary pressure. After a series of increases in 2004 and 2005, short-term interest rates have held steady at five and a quarter percent. Bernanke was cautious in addressing the inflationary outlook.

"As I noted earlier, there are some signs that inflationary pressures are beginning to diminish," he said. "The monthly data are noisy [unclear], however, and consequently it will be more time before we can be confident that underlying inflation is moderating as anticipated."

Bernanke said the weak housing sector remains a cause of concern, but saw signs of improvement.

"Single family housing starts have dropped more than 30 percent since the beginning of last year and employment in the construction sector has slowed dramatically. Some tentative signs of stabilization have recently occurred in the housing market," added Bernanke. "New and existing home sales have flattened out in recent months, mortgage applications have picked up, and some surveys find that home buyer sentiment has improved."

After several years of rapid increases, U.S. home prices fell last year and many experts say the market bottom has not yet been reached.

But the general theme of Bernanke's testimony was optimistic. He expects the U.S. economy to expand by nearly three percent this year and next with exports rising twice as fast as imports. He believes U.S. households are generally in good financial condition and that the business sector is healthy.

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