Federal Reserve Chairman Ben Bernanke is delivering his semiannual Monetary Policy Report to the Congress before the Committee on Financial Services at the U.S. House of Representatives this morning. 
 
Bernanke is noting that the recovery of the U.S. economy is continuing.  The caveat is that the pace of expansion has been “uneven and modest by historical standard” with real gross domestic product up at a 2-1/4 percent annual rate in the second half.  The limited information available for 2012 is consistent with growth proceeding in coming quarters at a pace “close to or somewhat above the pace that was registered during the second half of last year.”

Positive developments have been around employment at a rate more rapid than expected but still far from normal.

On spending, Bernanke noted, “the fundamentals that support spending continue to be weak: Real household income and wealth were flat in 2011, and access to credit remained restricted for many potential borrowers.”

As far as housing is concerned, Bernanke noted that affordability has increased dramatically after a decline in house prices and historically low interest rates but that is being met with potential buyers lacking the down payment and credit history required to qualify for loans.

There is more data on manufacturing activity and a slightly higher forecast for 2012 GDP.  Still, this sums up the caution: “participants did not anticipate further substantial declines in the unemployment rate over the course of this year. Looking beyond this year, FOMC participants expect the unemployment rate to continue to edge down only slowly toward levels consistent with the Committee’s statutory mandate.”

FULL REPORT

JON C. OGG

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