At his first press conference in April, Ben Bernanke was widely reviewed as pretty boring and predictable. At his second session on Wednesday, the Fed chairman was forced to address what he didn't predict two months ago: A slower recovery and tougher questions.
Bernanke admitted, “We have revised our outlook significantly since April.”
His most frequent answer: Look at the long term. That mantra allowed him to maintain that in 2012 the unemployment rate will hit between 7.8 percent and 8.2 percent, despite its recent spike as illustrated in the chart below. Should job creation continue to stay barely above the natural rate of growth, Bernanke fears the unemployment rate will come down “painfully slowly” and have long-term consequences.
Bernanke repeated his request to congressional budget negotiators to take a “longer-term view” as they discuss fiscal cuts.
And although he called the need to address the deficit problem “very urgent,” he said, “It would be best not to have sudden and sharp fiscal consolidation in the very near term.”
For his own longer-term view, Bernanke said that the Federal Open Market Committee would probably not be acting for at least two or three more meetings beyond the quantitative easing that ends as expected at the end of this month.