Bernanke’s testimony on the economy in front of the House Budget
Committee strikes a similar tone as the previous FOMC statement with
respect to economic activity and the less negative theme but still
expects rises in the unemployment rate over the next few months as it
lags. The expectations of a 2nd half rebound, albeit modest, still has
caveats as consumer spending remains weak and credit conditions still
remain tight. He did highlight the signs of bottoming in housing that he
sees as sales of existing homes have been fairly stable ytd. Due to the
sluggish growth but growth nonetheless that he forecasts, “we anticipate
inflation will remain low,” due to slack in resource utilization
remaining “sizable, “notwithstanding recent increases in the prices of
oil and other commodities.” Hopefully in the Q&A he’ll square this
thought on inflation with the recent action in the US$ and bond market
and also why he thinks the large US output gap matters for global
commodity prices.

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