Fed Chairman Bernanke Reports to Congress
As part of his testimony, Chairman Bernanke renewed his call for a fiscal policy exit strategy. The CRFB (Fiscal Roadmap Project) addresses this challenge in its call for a Fiscal Recovery Plan.
On the economy, Chairman Bernanke stated that the economy has improved and financial conditions are better since the beginning of the year, partly due to Fed activities. (For additional background, see CRFB's Fiscal Roadmap paper on the Fed's extraordinary actions.)
However, he noted that the economy remains weak and faces problems ahead, particularly if consumer spending falters as rising unemployment hurts income and confidence. (Many experts are also concerned about problems in the commercial real estate market.)
According to projections released with the report, Fed officials expect to see a gradual recovery starting in the second half of this year, continuing into next year, and picking up in 2011. The unemployment rate is expected to peak at the end of this year, but to remain higher than normal even into 2011. Inflation is expected to remain very low for awhile.