The US economic recovery is gaining traction and appears poised for growth of up to 4 per cent this year, Federal Reserve Chairman Ben Bernanke said on Thursday.
“We see the economy strengthening,” Bernanke said at small-business forum in Fairfax, a Virginia suburb of Washington. “Three or four per cent-type of growth seems reasonable.” In its latest projections in early November, the Fed forecast GDP growth at between 3 and 3.6 per cent by the end of the year.“I think deflation risk has receded considerably,” Bernanke told the business executives.
Fed officials had expressed concern a few months ago that deflation -- a pernicious downward spiral of prices and wages -- could take hold amid slack demand in an economy struggling to recover from severe recession.
The risk of deflation was a key factor in the Fed’s decision to boost its support of the economy, particularly through a $600 billion asset purchases plan announced in November.
Bernanke on Friday signalled the recovery would pick up slightly this year, but warned it would not be enough to reduce persistently high unemployment, which stood at 9.4 per cent rate in December.
On Wednesday, a central bank report showed the US economy had expanded “moderately” in recent months.
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