Interest Rates Won't Be Raised Anytime Soon

Washington, DC, July 21, 2009--Federal Reserve Chairman Ben Bernanke said interest rates will stay low for an extended period even as the economy is showing “tentative signs of stabilization.”

“The pace of decline appears to have slowed significantly,” Bernanke said in semi-annual testimony before the House Financial Services Committee. At the same time, “in light of the substantial economic slack and limited inflation pressures, monetary policy remains focused on fostering economic recovery,” he said.

The Fed said that policy will be “tightened” when the labor market improves, an economic recovery takes hold and pressures holding down inflation “diminish.”

Bernanke didn’t indicate that an economic recovery has taken hold. He said that financial markets remain under pressure and household spending is an important risk to the outlook because of continued job losses and declines in home values.

He also said that record budget deficits may begin to pose a threat to the recovery.

“Unless we demonstrate a strong commitment to fiscal sustainability, we risk having neither financial stability nor durable economic growth,” Bernanke said.