Bernanke says home price stabilization necessary to woo buyers
Federal Reserve Chairman Ben Bernanke said home price stabilization and a faster foreclosure process are needed to restore confidence in housing, unleashing a recovery in the sector. He also said the central bank expects the unemployment rate to slip to 8.6% by the latter part of 2011 and decrease to 7.5% by 2013. High unemployment continues to weigh down the economy and remains a significant contributor to the stalled housing recovery, Bernanke said Wednesday in the Fed's second press conference following a committee meeting. Despite projecting the economic recovery will pick up in coming quarters, Bernanke told reporters the economy is expected to grow at a slower pace than the Fed originally projected. He is advocating for congressional budget cuts that will occur over a longer, 10-year period as opposed to rapid budget reductions currently in play that could derail attempts to achieve maximum employment growth before a full recovery is reached. Bernanke, who continues to balance inflationary concerns against unemployment gains, said the inflation rate, which picked up in recent months, is expected to eventually fall back to a level of 2% or lower by 2012. He told reporters the Fed has not taken any action as far as additional asset purchases, but said that would be a committee decision at a later date. When asked about the risk Greece poses to the overall financial system, Bernanke said the banks that U.S. regulators oversee are not significantly exposed to the European countries facing debt crises. While he did note a direct tie to other European countries, Bernanke said, "We have asked the banks to do a stress test, looking at their positions and hedges and the effect on their capital if Greece defaults, and the answer is the effects would be very small." Write to: Kerri Panchuk.