High unemployment persists and the European debt crisis continues to threaten the economic recovery, Federal Reserve Chairman Ben Bernanke told the Congressional Joint Economic Committee yesterday. The real estate market also continues to serve as "another drag” on recovery, he noted.
But the Fed chairman likely will not push more stimulus programs when the Fed’s policy-making committee meets June 19 and 20, according to media reports. Instead, Bernanke pushed Congress to do more to help stimulate the economy.
For the Fed’s part, Bernanke said it will continue to keep short-term interest rates near zero, something it's done since late 2008 and plans to continue until 2014 — at least. This approach has helped keep mortgage rates at or near record lows for weeks.
Bernanke notes there have been improvements in the housing market lately, with an increase in sales, construction, and home prices.
Still, "despite historically low mortgage rates and high levels of affordability, many prospective home buyers cannot obtain mortgages, as lending standards have tightened and the creditworthiness of many potential borrowers has been impaired," Bernanke said. "At the same time, a large stock of vacant houses continues to limit incentives for the construction of new homes, and a substantial backlog of foreclosures will likely add further to the supply of vacant homes."
Consumer confidence also remains low with regard to the economy, with households rating their income prospects as "relatively poor” and reporting they expect little improvement in the coming months, Bernanke noted.