By Denny Gulino

WASHINGTON (MNI) – Federal Reserve Chairman Ben Bernanke Wednesday
saw auto sales, capital investment, consumer spending and the uptick in
hiring supporting a gradual improvement through the next several
quarters and did not elaborate what that meant for interest rates.

“On balance, the incoming data suggest that growth in private final
demand will be sufficient to promote a moderate economic recovery in
coming quarters,” he told the Joint Economic Committee. “In particular,
after slowing in January and February, sales of new light motor vehicles
bounced back in March as manufacturers offered a new round of
incentives.”

Looking ahead, he said consumer spending “should be aided by a
gradual pickup in jobs and earnings, the recovery in household wealth
from recent lows, and some improvement in credit availability.”

Bernanke repeated that postponing a credible fiscal plan will only
make future choices more difficult.

On the downside “restraints” still in place, Bernanke listed
construction and the budget problems of state and local governments.

In the labor market, Bernanke noted “some encouraging signs that
layoffs are slowing and that employment has turned up,” with March a
third month of increase for manufacturing employment.

Still, “a significant amount of time will be required to restore
the 8 1/2 million jobs” lost in two years. Particularly concerning, he
said, is that 44% of the unemployed have been jobless six months or
more.

“Subdued” inflation and stable long-run inflation expectations
rounded out his assessment of the economy. Financial markets keep
approaching normal, with bank funding spreads and the commercial paper
market returning “to near pre-crisis levels.”

Nowhere in the seven pages of prepared testimony did Bernanke take
the opportunity to repeat the FOMC’s “extended period” language but the
first question he answered did see him reiterate the FOMC declared it
sees low rates for that “extended period.”

“They have emphasized, however, that forecast is conditional on
three sets of conditions,” he continued, “one, very low resources
utilization — high unemployment, low capacity utilization; second,
subdued inflation trends — low inflation, and third, stabilization
expectations.”

If the outlook changes, he said, “We will respond to that.”

Bernanke went on to say the Fed will be looking at “a broad range
of indicators” including inflation expectations and “what is happening
in financial markets” to see that “financial imbalances are not
building.”

** Market News International Washington Bureau: 202-371-2121 **

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