Bernanke: Fed’s Policies Should Help to Reduce Long Term Unemployment Rate

Arlington, Virginia

Speaking at the National Association of Business Economics in Arlington, Fed Chairman Ben Bernanke said that the Fed’s policies should help to reduce the long term unemployment rate and suggested that the Fed will maintain the long term easing policy which keep interest rates low through 2014.

Calling the improving job market a “welcome development” Bernanke said that economic growth has been faster than might have been expected.

However, he emphasized that some risks remain on the horizon.

“We cannot yet be sure that the recent pace of improvement in the labor market will be sustained,” Bernanke said. He pointed out that drop in the unemployment level was good news but “out of synch with the overall pace of growth.”

 U.S. gross domestic product grew 2.8 percent in the fourth quarter, but is expected to have slowed to just below 2 percent in the first three months of this year.

 The U.S. economy added 200,000 jobs each month since January while the unemployment rate has lowered to 8.3% from 9% during the past five months.  That’s the lowest jobless rate since February 2009, and down from a peak of 9.9 percent.

“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 accommodating policies,” Bernanke explained.

As long as inflation remains sustainable , economists believe the Fed will likely hold interest rates down to give the economy more support and not make any changes in policy during their next meeting on April 25-26.

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