Ben Bernanke cautious on US economy

Unusually uncertain - that is how Federal Reserve Chairman Ben S. Bernanke sees the prospects for the US economy. His guarded view of the world’s largest economy sent US stocks into a bit of a tizzy but Wall Street managed bounced back the next day. The Fed chief also said that the central bank is willing to do more to shore up growth. But he did not elaborate further on what actions the Fed might take should the economic recovery starts losing steam. The markets seemed disappointed that Bernanke did not offer any specifics about a contingency plan for additional stimulus measures if there is another dip in the US economic growth.



"We are ready and we will act if the economy does not continue to improve," Bernanke told the House Financial Services Committee. The first option would be to signal to markets that rates are on hold for a very-long period. The second would be to reduce the interest rate on excess reserves, and the final option would be adjusting the balance sheet by not letting maturing mortgage-related securities run off. Bernanke said he expects a gradual recovery in the US over the next few years, although the labor market healing will be slower than previously thought. He said it would take significant time to restore the 8.5 million jobs lost in 2008 and 2009.