US economy to continue growth - Bernanke

Monday 16 November 2009 19.19
Ben Bernanke - 'Attentive' to dollar's slide
Ben Bernanke - 'Attentive' to dollar's slide

US Federal Reserve chairman Ben Bernanke said today he expects the US economy to sustain its growth into 2010 despite 'important headwinds' including tight credit and weak employment.

Bernanke said he sees the economy maintaining growth - after expanding in the third quarter following four quarters of declines - despite fears of a so-called double-dip recession.

'The stabilisation of financial markets and the gradual restoration of confidence are in turn helping to provide a necessary foundation for economic recovery,' he said in a speech to the New York Economic Club.

'We are seeing early evidence of that recovery.'

Bernanke also said the Fed is 'attentive' to the slide in the US dollar and is working to keep the greenback strong as part of its effort to maintain economic stability.

'We are attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability,' he said.

'Our commitment to our dual objectives, together with the underlying strengths of the US economy, will help ensure that the dollar is strong and a source of global financial stability.'

Bernanke's comments come with the greenback under heavy pressure in foreign exchange markets, raising complaints from around the globe about the weak US currency that could have significant impacts on various economies.

Because of the Fed's near-zero interest rate policy, the dollar is being used by investors for so-called carry trades in which they borrow greenbacks at low rates to invest in higher-yielding assets such as commodities and bonds of other governments. This increases pressure on the dollar.

Bernanke gave no fresh hint on when the Fed would begin lifting rates, but repeated the comments made by the Federal Open Market Committee that conditions 'are likely to warrant exceptionally low levels of the federal funds rate for an extended period'.

After four negative quarters, the world's largest economy grew at a seasonally adjusted 3.5% annual rate in the July-September period.

Bernanke acknowledged that some of the growth came from temporary government support but nonetheless said he expects the expansion to continue, dismissing the notion of a double-dip recession.