Bernanke Takes Middle Ground

Federal Reserve Chairman Ben Bernanke gave few hints about the future of monetary policy in a speech Tuesday before the National Italian American Foundation in New York.

The U.S. economy has slowed, but "the deceleration in economic activity currently under way appears to be taking place roughly along the lines envisioned in the Federal Reserve's July report," the chairman said.

Bernanke suggested "real GDP growth this quarter is likely to be in the same general range that it was in the second and third quarters" when it averaged 2.1% vs. an average of 3.5% in the preceding two years.

But the Fed chairman also said that "outside of the housing and motor vehicle sectors, economic activity has, on balance, been expanding at a solid pace," as evinced most notably by the strong labor market.

"A reasonable projection is that economic growth will be modestly below trend in the near term but that, over the course of the coming year, it will return to a rate that is roughly in line with the growth rate of the economy's underlying productive capacity," Bernanke said. "This scenario envisions that consumer spending --supported by rising incomes and the recent decline in energy prices -- will continue to grow near its trend rate, and that the drag on the economy from the motor vehicle and housing sectors will gradually diminish."