WASHINGTON (AP) – New Federal Reserve Chairman Ben Bernanke said yesterday the economy is on track for good growth this year, sticking closely to predecessor Alan Greenspan’s script with one big difference: His comments were much easier to understand.
In his debut congressional testimony as Fed chairman, Bernanke signaled that the central bank, which has raised interest rates 14 times since June 2004, stood ready to boost rates more if needed to combat inflation.
Investors and private economists, who had been apprehensive that Bernanke might sound a tougher line on inflation than Greenspan, said they detected no switch in policy from the Greenspan Fed.
“There were no big surprises. Bernanke kept very much to the promise he made at his confirmation hearing that he would maintain continuity with Greenspan,” said David Jones, chief economist of DMJ Advisors, a private forecasting firm in Denver.
Wall Street took Bernanke’s testimony in stride with stocks ending the day up slightly. The Dow Jones industrial average rose 30.58 points to close at 11,058.97 after rising 136 points Tuesday.
A respected economics professor at Princeton before entering government service as a Fed governor in 2002, Bernanke demonstrated during more than three hours of grilling from the House Financial Services Committee that he was up to the task of answering questions without upsetting financial markets.
Several committee members in fact complimented Bernanke for his straightforward answers, a contrast to Greenspan, who mastered the art of using complex sentences to dodge questions he did not want to answer.
“I can see you are a former teacher,” said Rep. Carolyn Maloney, (D-N.Y.) “You are very clear in your responses.”
But while Bernanke was more direct, he skillfully avoided being led into areas where he did not want to state an opinion. Democrats tried several ways to get Bernanke, who served last year as Bush’s chief economist, to criticize the president’s drive to make the tax cuts permanent at a time of high budget deficits.
At one point, when pressed for an opinion on raising the minimum wage, he apologized, saying, “I am going to be an economist and give you the one hand, the other hand” response.
Dressed in a conservative gray suit, Bernanke sat alone at the witness table, often scribbling notes on the questions, as he was pushed to talk about a variety of issues from soaring budget and trade deficits to what should be done about growing gap between the wealthy and the poor.
He acknowledged that widening income inequality was a problem, but he said it had been occurring for a quarter-century and as did Greenspan, he said the best way to deal with the problem was through education and job retraining.
The only time Bernanke seemed uncomfortable was when he was asked for his reaction to speeches Greenspan has made, reportedly for large amounts of money, to an audience in Tokyo and a New York investment house.
“According to government ethics rules … it is permissible for a retired (Fed) governor to speak in public about the economy so long as he or she does not divulge confidential information,” Bernanke said. “I have no indication that he has violated that rule.”
The Jan. 31 Fed meeting was the last presided over by Greenspan, who stepped down that day after 18 1/2 years as Fed chairman to be succeeded the next day by Bernanke.
Private economists predicted the central bank will raise its target for the federal funds rate, the interest banks charge each other, by another quarter point to 4.75.