Federal Reserve Chairman Ben Bernanke told the U.S. House Budget Committee on Wednesday, June 9, that the nation's economy continues to grow at a moderate pace and that while European debt problems have roiled financial markets, they should have only a modest impact on growth.
"The recovery in economic activity that began in the second half of last year has continued at a moderate pace so far this year," Bernanke said in his statement. "Moreover, the economy–supported by stimulative monetary policy and the concerted efforts of policymakers to stabilize the financial system–appears to be on track to continue to expand through this year and next."
Turning to developments in Europe, Bernanke noted that market concerns have mounted over the ability of Greece and other countries to manage their sizable budget deficits and high levels of public debt. As a result, he said, investors' worries about problems such as exposure of major European financial institutions to vulnerable countries have torn through the markets here.
"U.S. financial markets have been roiled in recent weeks by these developments, which have triggered a reduction in demand for risky assets: Broad equity market indexes have declined, and implied volatility has risen considerably," Bernanke said. "Treasury yields have fallen as much as 50 basis points since late April, primarily as a result of safe-haven flows that boosted the demand for Treasury securities. Corporate spreads have widened over the same period, and some issuance of corporate bonds has been postponed, especially by speculative-grade issuers."
