Consumer spending in the U.S. rebounded in May following the largest drop in more than three years, a Commerce Department report showed today, a sign the economy can weather a second- quarter slowdown. Other reports showed the housing recovery is gaining momentum and consumers are becoming more confident.
Bernanke, at a June 19 press conference following a meeting of the FOMC, outlined a plan for the reduction in the bond purchases that have helped spur growth and fuel a stock market rally. He said the Fed could start curtailing the current $85 billion pace later this year and end them around mid-2014, assuming the economy meets the Fed’s forecasts.
Lockhart, using a smoking metaphor, said the investors had misinterpreted the Chairman’s remarks. “It seems to me the Chairman said we’ll use the patch, and use it flexibly, and some in the markets reacted as if he said ‘cold turkey,” Lockhart said in a speech to the Kiwanis Club of Marietta in Georgia.
Powell said and decision to reduce purchases would depend on economic data, and that there’s no set timetable.
“I want to emphasize the importance of data over date,” Powell said at the Bipartisan Policy Center in Washington. “In all likelihood, the current” large-scale asset purchases “will continue for some time.”
The officials spoke a day after a Commerce Department report showed first-quarter growth in the U.S. was less than forecast as a payroll tax increase reduced consumer spending.
“I continue to see the economy as being in a tug-of-war between fiscal drag and underlying fundamental improvement, with a great deal of uncertainty over which force will prevail in the near-term,” Dudley said.
A report next week from the Labor Department may show that the unemployment rate fell to 7.5% this month from 7.6%, according to the median forecast in a Bloomberg survey of economists. Employers probably added 165,000 workers to payrolls, down from 175,000 the prior month. The jobless rate peaked at 10% in October 2009.