Bernanke: Credit, job market still obstacles for recovery

Federal Reserve Chairman Ben S. Bernanke said reduced bank lending, a deteriorating situation in commercial real estate and a weak job market will restrain the pace of the nation’s recovery from the longest, deepest economic downturn in seven decades.

The unemployment rate, which reached 10.2 percent in October and is expected to climb higher, “will decline only slowly if economic growth remains moderate, as I expect,” Mr. Bernanke said Monday in a speech at the Economic Club of New York.

Mr. Bernanke attributed the recent run-up in commodity prices to a pick-up in global economic activity and “the recent depreciation of the dollar.” He said the Fed would continue to closely monitor developments in foreign exchange markets. The Fed’s commitments to its dual objectives of maximum employment and price stability, “together with the underlying strengths of the U.S. economy, will help ensure that the dollar is strong and a source of global financial stability,” the Fed chairman said.

Mr. Bernanke expects inflation will likely remain subdued for some time. The consumer price index declined by 1.3 percent during the 12-month period ending in September.

Given his expectations of moderate economic growth and low inflation, Mr. Bernanke repeated the Fed’s projection that exceptionally low levels of short-term interest rates will remain in effect “for an extended period.”