Bernanke Calls Housing Downturn ‘Orderly’
By THE ASSOCIATED PRESS
Published: July 21, 2006
WASHINGTON, July 20 (AP) — The Federal Reserve chairman, Ben S. Bernanke, told Congress on Thursday that the once high-flying housing market appeared to be experiencing a safe landing.
“The downturn in the housing market so far appears to be orderly,” Mr. Bernanke said during a hearing before the House Financial Services Committee.
One of the things that Mr. Bernanke and his Fed colleagues are keeping close tabs on is the extent to which a housing slowdown will dampen overall economic activity.
Mr. Bernanke’s appearance was the second in two days as he gives Congress a semiannual review of the economy. On Wednesday, Mr. Bernanke told senators he believed the slowing economy would help keep inflation in check.
But record high energy prices are hurting the economy, Mr. Bernanke said.
“The increase in energy prices is clearly making the economy worse off both in terms of real activity and in terms of inflation,” he said. “There is no question about it.”
The rise in core inflation, which excludes energy and food prices, “seems to be a broad-based phenomenon, so we don’t think it is a statistical illusion,” Mr. Bernanke said. Fed policy makers pay close attention to this core measure to get a better sense of how other prices are acting.
On other matters, Mr. Bernanke said that the large holdings of the mortgage giants Fannie Mae and Freddie Mac did “present a systemic risk” to the nation’s financial system.
He previously has called on Congress to restrict their holdings.
On workers’ issues, Mr. Bernanke said that he expected inflation-adjusted wages to rise in the coming quarters without necessarily causing an inflation problem. Last year, most workers’ paychecks trailed inflation.
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