In prepared remarks before his appearance, he said of the current economic conditions,
“Fortunately, over the past few months, indicators of spending, production, and job-market activity have shown some signs of improvement. The outlook remains uncertain, however, and close monitoring of economic developments will remain necessary.”
On Thursday he reiterated what he had said after last week’s January FOMC meeting that the economy would have near zero interest rates through the end of 2014. The committee had decided on a 2 percent inflation target which supports Bernanke’s goal to reduce “public uncertainty” about monetary policy.
In front of the House Budget Committee, Bernanke added,
“In an environment of well-anchored inflation expectations, more-stable commodity prices, and substantial slack in labor and product markets, we expect inflation to remain subdued. ”
Other topics that Bernanke touched on Thursday included the following.
Bernanke had been criticized by the committee’s chairman Republican Representative Paul Ryan of Wisconsin for letting the Fed overlook inflation above its target as a means to decrease unemployment.
The Fed Chair responded by saying,
“We will not actively seek to raise inflation or to move away from the target. We’re always trying to bring inflation back to the target.”
He did concede that “the pace of the recovery has been frustratingly slow, particularly from the perspective of the millions of workers who remain unemployed or underemployed. Moreover, the sluggish expansion has left the economy vulnerable to shocks.”
On Friday, January employment figures will be released by the Labor Department. Bernanke said that in the last year the labor market had “improved modestly.” Total January non-farm payrolls are estimated to increase by 145,000 jobs with unemployment expected to remain at 8.5 percent. In December, the rate was at 8.7 percent.
Bernanke said regarding consumer confidence:
“it remains at levels that are quite low by historical standards” and that the “pace of growth in business investment has slowed, likely reflecting concerns about the domestic outlook and developments in Europe.”
“There are signs that these concerns are abating somewhat if business confidence continues to improve, U.S. firms should be well positioned to increase both capital spending and hiring.”
After last week’s FOMC meeting, Bernanke said that another round of large-scale asset purchases is “an option that is certainly on the table.”
Ryan has not been a supporter of some the Fed’s bond buying and with its second round announced in November 2010, he had expressed concern that it would create asset-price bubbles and fueling inflation, according to Bloomberg.
In his opening remarks on Thursday, Ryan said, “I was greatly concerned to hear the Fed recently announce that it would be willing to accept higher-than-desired inflation in order to focus on the other side of its dual mandate, which is promoting employment.”
Ryan isn’t the only Republican opposed to some of Bernanke’s actions. Republican presidential hopefuls Mitt Romney and Newt Gingrich have said they won’t keep him as Fed chief. His four-year term will expire on Jan. 31, 2014.