Bernanke continued to assert that the Fed intends to hold short-term interest rates near zero through 2014, which will help keep mortgage rates low. He also said the Fed has been investing in government debt that will possibly reduce long-term interest rates even more.
With the economy showing some signs of improvement — including a drop in the jobless rate to 8.3 percent in February (compared to 9.1 percent last summer) — many investors had assumed the Fed would reverse course and announce a raise in interest rates starting in July 2013.
But Bernanke stood firm Monday on the Fed’s vow to keep key rates low until 2014. Bernanke cited continued concerns over long-term unemployment.
“Recent improvements are encouraging,” Bernanke said. However, “millions of families continue to suffer the day-to-day hardships associated with not being able to find suitable employment.”
Unemployment particularly remains high for those who have been unable to find a job for six months or more. Research has shown those who are out of work for an extended period of time are more likely to see permanent declines in wealth, health, and earnings potential.
Source: “Bernanke Says Faster Growth Is Needed to Bolster Job Market,” The New York Times (March 26, 2012) and “Bernanke: U.S. Needs Faster Growth to Lower Unemployment,” Reuters News (March 26, 2012)