Economy – Fed Head Sees Significant Long-Term Threat
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Today, Federal Reserve Chairman Ben Bernanke said, in part, that rising deficits posed a significant long-term threat. Bernanke said: “Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance. Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth.”
If the United States is unable to control its long-term deficits, it could weaken the dollar and drive up inflation, hurting the value of those dollar-denominated assets. Bernanke also said: “We now are on a process of slow and gradual repair, both in the financial system and the economy. We averted, I think, a very, very serious calamity. As a consequence, inflation is likely to move down some over the next year relative to its pace in 2008. That said, improving economic conditions and stable inflation expectations should limit further declines in inflation.”