Federal Reserve Chairman Ben Bernanke said that there are signs the rate of decline in economic activity appears to be slowing, leaving him "fundamentally optimistic" about the U.S. economy and a possible recovery. Speaking at Morehouse College in Atlanta, Bernanke said that recent data are encouraging and could signal a bottoming in the decline of economic activity. "Recently we have seen tentative signs that the sharp decline in economic activity may be slowing, for example, in data on home sales, homebuilding, and consumer spending, including sales of new motor vehicles," Bernanke said in prepared remarks. "A leveling out of economic activity is the first step toward recovery." Bernanke was quick to point out that a sustainable recovery will not come without a stabilization in the financial system and credit markets, although he remarked that the U.S. is "making progress on that front as well, and the Federal Reserve is committed to working to restore financial stability as a necessary step toward full economic recovery." He also said he was "fundamentally optimistic about our economy," adding that conditions remain "difficult, but the foundations of our economy are strong, and we face no problems that cannot be overcome with insight, patience, and persistence."
Still, Fisher said he expects that the first-quarter read on economic activity in the U.S. will be "quite grim." Economists expect a sharp decrease in first-quarter gross domestic product, which would be the third-straight month of negative growth. GDP fell 6.3% in the fourth quarter of 2008 and 0.5% in the preceding quarter. Fisher, currently a nonvoting member of the central bank's policymaking arm, has been a notoriously hawkish member of the Fed, voting five times for tighter policy moves in 2008.
"I can assure you that monetary policy makers are fully committed to acting as needed to withdraw on a timely basis the extraordinary support now being provided to the economy, and we are confident in our ability to do so," Bernanke said. Indeed, inflation does not appear to be a threat at the moment. Before Tuesday's open, the Labor Department said that its producer price index fell by 1.2% in March, compared with expectations for a flat reading. The core figure, which excludes food and energy, was unchanged, whereas forecasts were for a 0.1% rise. The consumer price index, set for release Wednesday morning, is arguably the more important of the two economic reports as it shows inflationary pressures on the consumer level. The headline number is expected to rise 0.2% and the core CPI figure should increase 0.1%, according to economists. Ian Shepherdson, chief economist with High Frequency Economics, is not encouraged by the PPI data, arguing that the trend in core PPI follows the trend in core materials prices. "The latter are down 33% year-over-year, so core PPI for finished goods will be heading downwards for the foreseeable future," he wrote in an email. "Disinflation pressure remains extremely intense."