Bernanke Unplugged: Predicts Unemployment Will Rise

Fed Chairman Ben Bernanke speaks candidly about the nation's credit crisis.

ByABC News
February 18, 2009, 6:23 PM

WASHINGTON, Feb. 18, 2009— -- Federal Reserve chairman Ben Bernanke today defended the Fed's actions to lift the country out of the economic crisis and vowed to do whatever it takes to get the nation back on its feet.

"In the United States, the Federal Reserve has done, and will continue to do, everything possible within the limits of its authority, to assist in restoring our nation to financial stability and economic prosperity as quickly as possible," Bernanke said in a speech at the National Press Club.

"Extraordinary times call for extraordinary measures," he said later.

It is these extraordinary measures, such as the administration's attempt to reignite the flow of credit, that Bernanke said he considers imperative to rescue the nation from recession.

Noting that the unemployment rate is "very likely" to rise "above eight, for sure," Bernanke said, "If we can take strong and aggressive action, including the Fed's action to try to improve credit markets, I think we can break the back of this thing and we can begin to see improvements in 2009. If we fail to take adequate actions, then the situation will continue to deteriorate and then unemployment would obviously be higher in that case."

However, these extraordinary measures have also prompted concerns about taxpayer risk and higher inflation, but Bernanke today attempted to ease these worries.

"At this point, with global economic activity weak and commodity prices at low levels, we see little risk of unacceptably high inflation in the near term," Bernanke said. "Indeed, we expect inflation to be quite low for some time."

To soothe concerns about taxpayer risk, Bernanke noted, "For the great bulk of Fed lending, the credit risks are extremely low."

In a wide-ranging question-and-answer session following his speech, Bernanke touched on topics ranging from the nationalization of banks to Alex Rodriguez's steroid use.

As more and more layoffs take place, people are spending less and saving more at the very time when the economy needs spending to increase. Save a little, Bernanke told consumers, but we need you to spend.