The economy slowed to an annual growth rate of just 0.1 percent in the October-December quarter, a near-stall that was due mainly to temporary factors that have largely faded. Economists think growth has rebounded in the January-March quarter to an annual rate around 2 percent or more. The most recent data support that view.
Americans spent more at retailers in February despite higher Social Security taxes that shrank most workers' paychecks. Manufacturing gained solidly in February. And employers have gone on a four-month hiring spree, adding an average of 205,000 jobs a month. In February, the unemployment rate, though still high, reached its lowest point since December 2008.
One reason for the Fed's reluctance to reduce its stimulus is the history of the past three years. In each of the three, economic prospects looked promising as the year began. Yet in each case, the economy stumbled.
Though the economy has brightened this year, it still faces threats, including across-the-board government spending cuts that took effect March 1 and are expected to trigger furloughs and layoffs.
The Fed's forecasts for the economy are rosier than those issued by the Congressional Budget Office. The CBO has warned that the government spending cuts, along with the Social Security tax increase and higher taxes on top earners, could slow growth by 1.5 percentage points this year, to 1.5 percent.
Bernanke, whose second four-term term as chairman ends in January 2014, was asked whether he might stay on for another term. Doing so could allow him to manage the Fed's delicate transition from stimulating the economy to selling its vast investment portfolio and gradually raising interest rates to prevent inflation.
"I don't think I am the only person in the world who can manage the exit," Bernanke said. "With respect to my personal plans, I will certainly let you know when I have something more concrete."
___
AP Economics Writer Christopher S. Rugaber contributed to this report.
Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Reader Comments (