2006 Economic Growth Essay

The article, “Bernanke: Economy Healthy, but...”, posted on CNNMoney.com, discusses how even though there has been a housing slowdown, inflation still looks as though it will not be an issue.   Bernanke feels that as the slowdown from housing disappears, the U.S. economy will begin to expand at a more moderate pace during 2007 and into 2008.     There are a few factors, however, that Bernanke says could change this outcome.   Prices for oils and other commodities such as foreign technology are outside of U.S. control and therefor could have a negative impact on the U.S. economy if things take a turn for the worse.   Bernanke says that for the most part this looks doubtful, and as long as foreign trends continue the U.S. economy should do well in the coming quarters.   Bernanke also address the Fed’s plans for the coming year, whereas they have stated interest rates at 5.25 percent, which is likely to spark solid growth and slowly decrease core inflation, which is measured by the price index for personal consumption spending minus food and energy.   Bernanke did reiterate, however, that if inflation risks do develop the Fed is prepared to take action.   From Bernanke’s view that inflation pressures were shrinking, the prices for stocks and government bonds rose, while the value of the dollar fell, as traders thought that the Fed may lower interest rates later in 2007. While many different factors show that the U.S. economy will enjoy healthy and sustained growth, the rate of hiring still may be slower than anticipated.   Bernanke feels that until the “Baby-Boomers” retire we will continue to see tentative hiring throughout the U.S.   I feel that as long as oil prices remain steady, the rest of the economy will remain stable and the U.S. economy will see steady growth through 2008.