Consumer caution hurting economy, says Bernanke
09 Sep 2011
Federal Reserve chairman Ben Bernanke said the caution exercised by consumers two years since the recession officially ended is holding up recovery in the US economy, but he did not say what steps the Fed would take to boost the weak economy.
Bernanke said consumers were discouraged from spending more freely due to a number of factors, including high unemployment, a temporary spike in energy prices, falling home prices and high debt burdens.
"Even taking into account the many financial pressures they face, households seem exceptionally cautious," Bernanke said, according to a transcript of a speech he gave in Minneapolis.
Acknowledging that prices for gas, cars and other consumer goods had risen sharply this year, he attributed the increases to temporary factors, such as supply chain disruptions stemming from the Japan crisis. He expected inflation to moderate in the coming months as those factors eased.
The Fed would consider a range of policy options at its next meeting later in the month, according to Bernanke. He, however, did not offer any clues as to what it might do. According to analysts, his comments were along the lines of the ones he made last month during a speech at Jackson Hole, Wyoming.
According to some economists, the Fed would need to take further action to help the economy avoid another recession.
The economy was flat in the first half of the year, with the government saying last week that employers had stopped adding jobs in August.
Consumers and businesses were feeling less confident after a rocky summer, while lawmakers wrangled over raising the federal borrowing limit. Standard & Poor's downgraded long-term US debt, and stocks fluctuated wildly after a steep fall in late July and early August.
