US shares rise after Bernanke comments

THE US economy needs to grow more quickly to bring the unemployment rate down further, according to Federal Reserve Chairman Ben Bernanke.

While he offered no indication the Fed is keen to embark on a third round of bond purchases, Mr Bernanke also made clear that the central bank is in no rush to reverse course after responding aggressively to a deep recession.

The jobless rate has dropped to 8.3 per cent from 9.1 per cent last summer, a move Mr Bernanke said was “somewhat out of sync” with the rather modest pace of economic growth.

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He said the decline could reflect an effort by businesses to recalibrate their payrolls after unusually heavy job cuts during the recession. If this is the case, he said, progress may stall.

“To the extent that this reversal has been complete, further significant improvements in the unemployment rate will likely require a more rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies,” Mr Bernanke told the National Association for Business Economics.

After its last two meetings, the Fed said it was likely it would keep rates near zero at least until late 2014, but upbeat economic signs, including solid employment growth, have led investors to bet on a move as early as the middle of next year.

US stocks climbed on hopes that Mr Bernanke’s speech could be a precursor to more Fed bond purchases, with each of the major indexes up at least one per cent.