Federal Reserve Board Chairman Ben Bernanke says the U.S. economy is
facing numerous difficulties amid a continuing downturn in housing,
high oil prices, and renewed turmoil in financial markets. VOA's Barry
Wood has more.
In an appearance before the Senate Banking
Committee, Bernanke made clear that monetary policy is aimed at keeping
the economy growing and fighting inflation. He gave no indication of
future moves in interest rates.
The central bank chief told
lawmakers the woes besetting the economy are more severe than they have
been for several years, and as a result economic growth will be slower
than earlier anticipated.
"Over the remainder of this year
output is likely to expand at a pace appreciably below its trend rate,
primarily because of continued weakness in housing markets, elevated
energy prices and weak credit conditions," said Ben Bernanke. "Growth
is projected to pick up gradually over the next two years as
residential construction bottoms out and begins a slow recovery and as
credit conditions gradually improve."
Bernanke was asked about
the government's rescue of two federally chartered agencies that are
the biggest players in the residential mortgage market. He defended
the plan to offer assistance to the agencies, known as Fannie Mae and
Freddie Mac, and called for Congress to enact legislation that will
strengthen public oversight of both entities.
Bernanke said the
economic outlook has downside risks mainly because of uncertainty about
future oil prices, which are up 50 percent this year and 500 percent
since the beginning of the decade.
"Our best judgment is that
this surge in prices has been driven predominately by strong growth in
underlying demand and tight supply conditions in global oil markets,"
he said. "Over the past several years the world economy has expanded at
is fastest pace in decades, leading to substantial increases in the
demand for oil."
Bernanke said a weak dollar may have contributed somewhat to the sharp rise in oil.
the U.S. Labor Department reported soaring costs for gasoline and food
pushed producer prices up by 1.8 percent in June and 9.2 percent during
the 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.