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Bernanke predicts slow drop in unemployment

Federal Reserve chairman Ben Bernanke admitted on Tuesday that US economic data had been ‘disappointing’ and that a future reduction in unemployment would likely prove ‘frustratingly slow.’

Dealing a blow to Barack Obama and others hopeful for an improvement in economic news ahead of November's presidential elections, Bernanke offered a gloomy assessment of the outlook for the world's top economy.

In prepared testimony to Congress, the Fed chair forecast slower growth for this year and next, and a future replete with pitfalls both domestic and from Europe.

‘Given that growth is projected to be not much above the rate needed to absorb new entrants into the labor force, the reduction in the unemployment rate seems likely to be frustratingly slow,’ he said.

After growth rose a modest two per cent in the first quarter of this year, Bernanke said ‘available indicators point to a still-smaller gain in the second quarter.’

He noted that members of the Fed's top policy-setting panel had predicted that growth will reach 1.9 to 2.4 per cent this year.

With unemployment still stuck above eight per cent, nearly four years after the worst of the financial crisis, investors will parse Bernanke's words for signs of more stimulus to come.

Bernanke signal his unease with the state of current affairs, leaving the prospect of more action firmly in play.
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