Bernanke Says 2010 Will be Year of Recovery; Hodes Agrees
Hodes Finance
New Hampshire Union Leader
Aoife Connors
Boston University Washington News Service
Feb. 25, 2009
WASHINGTON – Ben S. Bernanke, chairman of the Federal Reserve, declared Wednesday that “2010 will be a year of recovery,” while testifying at House Committee on Financial Services hearing on monetary policy and the state of the economy.
The outlook for economic activity is subject to considerable uncertainty, Bernanke said, “but there is a reasonable prospect that the current recession will end in 2009.”
Rep. Paul Hodes, D-N.H, a member of the committee, agreed. “I believe we are heading towards that point at which the downward curve flattens out, and I do think that we will begin to feel that in 2009 so that in 2010 we will begin a period of slow and hopefully steady recovery,” Hodes said in an interview after the hearing.
Hodes said Bernanke “didn’t lay out anything startlingly new.”
Bernanke presented a dismal outlook by stating that the national unemployment rate has already risen to 7.6 percent and that the Fed expects the rate to increase to 8.5 percent by the fourth quarter of the year.
Consumer price inflation’s drop to almost zero, Bernanke said, was caused by “the substantial declines in the price of energy and other commodities last year.”
Hodes said he expects inflation will remain at almost zero “with the downward pressure on prices and spending projected.”
Keeping a close eye on the inflation rate when recovery begins will be necessary, Hodes said, so that inflation “does not rob struggling families of the benefits of the recovery to come.”
Hodes agreed with Bernanke’s view “that investment by the federal government in the economic and jobs program, as well as the actions taken to stabilize the financial system, are necessary in the current climate.”
The Federal Reserve is taking significant steps to address the credit crunch, Hodes said, “that should help middle-class families struggling in New Hampshire, particularly the new programs aimed at freeing up credit for education loans, student loans and programs aimed at freeing up the mortgage market.”
The deteriorating job market, losses of equity and housing wealth and tight lending conditions are the key sources of the rapid decline, Bernanke said. These “have weighed down consumer sentiment and spending.”
Bernanke told the committee “the principal cause of the economic slowdown was the collapse of the global credit boom” and the “ensuing financial crisis.”
The difficulty in obtaining credit is as a result of a significant drop in domestic spending and slumping exports “as our major trading partners fell into recession,” Bernanke said.
One of the risks to recovery, he said, arises from the global nature of the slowdown. “Global growth turned negative for the first time in 25 years.” This, he said, directly affects U.S. exports and financial stability.
Rep. Hodes said “the chairman of the Federal Reserve presented a sober and realistic assessment of where we are and where he sees us going.”
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