NC State Economist Dr. Mike Walden – Fed Worries
Federal Reserve Chairman Ben Bernanke recently testified before Congress about the Fed’s policies to support the economy. N.C. State University economist Mike Walden discusses what Bernanke had to say.
“… (W)henever any Fed chairperson, and in this case Ben Bernanke, speaks, we should all listen. Again, I think the media and people are focused on what happens between the president and Congress over the budget. But in the background, there’s the Federal Reserve. They have … enormous, enormous implications for the economy.
“And what Fed Chairman Bernanke said in his testimony before Congress (is) that in essence he’s going to continue the unprecedented Federal Reserve policy we’ve had in the last five years. He’s going to try to keep interest rates low. He argued he’s not really concerned right now about inflation. He doesn’t see any signs that this easy monetary policy, if you will, is going to generate more inflation. And he feels as if the Federal Reserve has to do these things in order to try to contribute to the economic recovery.
“Now interestingly … in another presentation later, Fed Chairman Bernanke said that he actually is forecasting interest rates eventually are going to go up, and in fact he argued that in a couple of years we could see interest rates that are now down around the 0 to 1 percent level maybe as high as 4 percent. And that actually sent shivers through some investors, who have been buying bonds and locking in those super-low interest rates.
“So very interesting recent commentary by the Fed chairperson. I think, bottom line, (it) is going to be steady as we go with the Fed.”