Bernanke Sees ‘Formidable Headwinds’ for Economy, Tight Credit

By Craig Torres and Shobhana Chandra
Dec. 7 (Bloomberg) -- Federal Reserve Chairman Ben S.
Bernanke said the U.S. economy faces "formidable headwinds,"
including a weak labor market and tight credit that are likely to produce a "moderate" pace of expansion.
"The economy confronts some formidable headwinds that seem likely to keep the pace of expansion moderate," Bernanke, 55, said today in the text of remarks to the Economic Club of Washington. "Despite the general improvement in financial conditions, credit remains tight for many borrowers," and the job market "remains weak."
Bernanke has led the most aggressive monetary stimulus in U.S. history, expanding the Fed’s balance sheet by $1 trillion and cutting the benchmark lending rate a year ago close to zero.
The economy grew at a 2.8 percent annual rate in the third quarter, and a report last week showed unemployment fell to 10 percent in November from 10.2 percent the previous month.
The Fed chairman said the U.S. central bank has the tools and commitment to keep price increases in check, and that inflation could subside further.
"Elevated unemployment and stable inflation expectations should keep inflation subdued, and indeed, inflation could move lower from here," Bernanke said. "The Federal Reserve is committed to keeping inflation low and will be able to do so."

‘Back From Brink’

The Fed chairman credited the U.S. central bank with pulling the economy "back from the brink," and suggested that growth is unlikely to be strong enough to lower unemployment at a fast pace. The speech was his first since his appearance at a Senate Banking Committee hearing last week on his nomination to a second term.
"We still have some way to go before we can be assured that the recovery will be self-sustaining," the Fed Chairman said. "My best guess at this point is that we will continue to see modest economic growth next year -- sufficient to bring down the unemployment rate, but at a pace slower than we would like."