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Fed Chairman Meets the Press

posted on April 29, 2011


Hello, I'm Mark Pearson. Stocks closed at yet another 2011 high Friday despite tepid economic expansion in the first quarter.

According to the Commerce Department, the U.S. economy as measured by gross domestic product grew at a modest 1.8 percent annual rate between January and March, its weakest performance since last spring.

Wall Street shrugged off the lackluster report, and the Dow Jones Industrials Average settled Friday with a weekly gain of more than 300 points.

Earlier in the week, the Conference Board reported its Consumer Confidence Index rose to 65.4 in April. Though well below the 90-mark indicating a healthy economy, the index has improved 40 points since it fell to an all-time low in February of 2009.

Demand also is on the rise in the manufacturing sector, where orders to U.S. factories for big-ticket durable goods rose 2.5 percent in March, in the third consecutive monthly gain. Economists are concerned, however, about the impact of higher energy prices on further growth.

The national average price for unleaded gasoline exceeded $3.90 per gallon this week, up 9 percent from last month and more than a dollar higher than a year ago.

And the U.S. dollar fell to a three-year low against six other major currencies Friday in the wake of the Federal Reserve's decision to leave interest rates unchanged, despite rampant inflation at the pump.

Immediately after the announcement, the nation's top monetary policymaker ventured into uncharted waters as Fed Chairman Ben Bernanke fielded questions from the media.

Ben Bernanke, Federal Reserve Chairman: "…the Fed didn't do this for a long time, and I think the counterargument has always been that if there was a risk that the chairman speaking might create unnecessary volatility in financial markets or may not be necessary, given all the other sources of information that come out of the Federal Reserve.

It was our judgment after thinking about this for some time that, at this point, the additional benefits from more information, more transparency, meeting the press directly, outweighed some of these risks."

Following the Federal Reserve's routine meeting, Chairman Ben Bernanke addressed reporters in the first scheduled news conference for the highly secretive federal board. The Federal Reserve Chair took on the burgeoning concern of how America's Central Bank should respond to commodity inflation.

Bernanke: "As I have noted, inflation -- headline inflation is at least temporarily higher, being driven by gasoline prices and some other commodity prices. Our expectation is that -- that inflation will come down towards a more normal level, but we'll be watching that carefully."

Critics of Federal Reserve policies point towards what they deem the board's "excessive control" over interest rates and the flow of capital throughout government and business sectors. Following a regularly scheduled meeting this week, Chairman Bernanke announced that short-term interest rates would remain near zero. He added the Fed's program to buy $600 billion of government bonds, an effort to spur lending and expand business known as quantitative easing, would end in June.

Bernanke: "The way monetary policy always works is by easing financial conditions, and we saw increases in stock prices. We saw reduced spreads in credit markets. We saw reduced volatility. We saw all the changes in financial markets, and quite significant changes, that one would expect if one was doing an ordinary easing of policy via a reduced federal funds rate."

Bernanke's historic press conference ended with a positive economic statement that underscored his growing status as a harbinger of financial realities.

Bernanke: "I can certainly understand why people are impatient. And I do think that the pace will pick up over time. And I am very confident that, in the long run, that the U.S. will return to being the most productive, one of the fastest growing and dynamic economies in the world. And it hasn't lost any of the basic characteristics that made it the pre-eminent economy in the world before the crisis. And I think we will return to that status as we recover."

 


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