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Bernanke Holding Line on Low Rates

Federal Reserve Chairman Ben Bernanke was back in the usual hot seat before Congressional lawmakers itching to garner TV coverage in an election year. And though news has been mostly positive about the U.S. economy, the Fed appears ready to continue on its path, no matter how popular or unpopular it may be with members of the U.S. House and Senate.

Bernanke presented the semi-annual Economic Outlook and the Federal Budget Situation over two days on Capitol Hill, with his most recent appearance coming Tuesday. The report indicated the economy continued to grow, albeit at not an exceedingly robust pace, on strength in sectors such as manufacturing. Additionally, the gains more than offset ongoing construction/real estate woes and concerns from economic problems abroad, primarily in the European Union and should continue to do so. Of keen interest to U.S. businesses are predictions of spending on capital improvements and hope for continued improvement in credit conditions.

"More recently, the pace of growth in business investment has slowed, likely reflecting concerns about both the domestic outlook and developments in Europe. However, there are signs that these concerns are abating somewhat," Bernanke said. "If business confidence continues to improve, U.S. firms should be well positioned to increase both capital spending and hiring: larger businesses are still able to obtain credit at historically low interest rates, and corporate balance sheets are strong. And, though many smaller businesses continue to face difficulties in obtaining credit, surveys indicate that credit conditions have begun to improve modestly for those firms as well."

Another key topic of conversation was the positive January unemployment numbers that shocked market-watchers by falling to 8.3%. Still, the chairman reaffirmed the Fed would keep the target for the federal funds rate near zero into 2014. He also warned that unemployment numbers for one month do not paint a complete, reliable picture about a U.S. labor market that still faces some problems or the fact that unemployment numbers do not track the many who have simply given up looking for a job as certain industry sectors and regions have seen an anemic rebound or stagnation to date.

Ken Goldstein of the Conference Board said the hot question right now is whether the "near bombshell" January employment numbers represent more of a temporary window or a real trend.

"Since I didn't expect the gain to be that high, I kind of side with the former," Goldstein told NACM. "It's comforting to think I'm on same side as Bernanke. It's a little like being in same huddle with Eli [Manning]." For those under a proverbial rock earlier this week, Manning led the New York Giants National Football League franchise to a victory in Super Bowl XLVI, which set a U.S. television-viewing record.

Brian Shappell, NACM staff writer