Bernanke: US economy is not out of the woods yet

THE US economy still faces significant headwinds, including a housing sector that has yet to recover convincingly and an ailing employment market, Federal Reserve chairman Ben Bernanke said yesterday.

In a speech that suggested the central bank chief was in no rush to begin raising interest rates, Bernanke outlined a number of challenges to the country’s growth outlook.

“Many Americans are still grappling with unemployment or foreclosure, or both,” Bernanke said in prepared remarks to the Dallas Regional Chamber of Commerce. “We are far from being out of the woods.”

In particular, Bernanke flagged continuing weakness in housing as a danger to the recovery, which he nonetheless said would be sustainable enough to bring down the unemployment rate slowly over time.

“We have yet to see evidence of a sustained recovery in the housing market,” he said.

Against that backdrop, the Fed chairman saw no immediate reason to be worried about inflation, which he characterised as “well controlled”.

In addition, inflation expectations, which Fed officials have singled out as a crucial guidepost for policy, appear to be stable, Bernanke said, both as measured by market indicators and surveys.