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Bernanke surprised by weak consumer spending but offers no hints of further aid for economy
WASHINGTON (AP) ' Federal Reserve Chairman Ben Bernanke said Thursday that he's surprised by how cautious consumers remain more than two years since the recession officially ended. But he offered no hints of further steps the Fed might take to try to boost the weak economy.
Bernanke noted that several factors have kept consumers from spending more: from high unemployment and falling home values to still-heavy debt loads and higher gasoline prices.
"Even taking into account the many financial pressures they face, households seem exceptionally cautious," Bernanke said in a speech in Minneapolis to the Economic Club of Minnesota.
Bernanke said that higher prices for gas, cars and other consumer goods were due, in part, to temporary factors, such as supply disruptions stemming from Japan's earthquake and nuclear crisis. As those factors continue to ease, the Fed chief said he expects inflation to moderate in the coming months.
He reiterated that the Fed will consider a range of options at its next policy meeting Sept. 20-21. Some economists have said the Fed must take further steps to drive down long-term interest rates and help the economy avoid another recession.
Bernanke's remarks Thursday were similar to those he made last month in a speech in Jackson Hole, Wyo. As he did in that speech, Bernanke said he supported Congress' push to reduce budget deficits over the long run. But he cautioned against cutting spending excessively while the economy remains so weak.
Congress, he said, "should not ... disregard the fragility of the economic recovery."
The economy barely grew in the first half of the year: It expanded at an annual rate of just 0.7 percent. And the government said last week that employers added zero net jobs in August.
Consumers and businesses are feeling less confident after a tumultuous summer. Lawmakers fought to the last hours over raising the federal borrowing limit, Standard & Poor's downgraded long-term U.S. debt and stocks gyrated wildly after plunging in late-July and early August.
On Aug. 9, the Federal Reserve said it planned to keep short-term rates at record lows until at least mid-2013, assuming the economy remained weak. Minutes from that meeting showed that some Fed officials pushed for more aggressive steps to try to help the economy.
One possibility is for the Fed to increase the percentage of long-term Treasury securities in the mix of securities it holds. That approach would have the advantage of exerting further downward pressure on long-term rates without swelling the Fed's already record-level of securities holdings.
Still, three regional bank presidents dissented from the Aug. 9 decision. They had expressed concerns that the Fed's policies were contributing to higher inflation.
The worsening jobs outlook has also put pressure on President Barack Obama. He was expected Thursday night to introduce a $300 billion jobs package before a joint session of Congress. The plan will likely include extensions of the Social Security tax cut and long-term unemployment benefits, tax incentives for businesses that hire and money for public works projects.
But the effort faces opposition from congressional Republicans, who say that Obama's previous stimulus program was a failure. They want deeper spending cuts to fight the government's soaring budget deficits.