europe have weighed on financial conditions and global economic growth, and problems in u. s. housing and mortgage markets have continued to hold down not only construction and related industries, but also household wealth and confidence. looking beyond 2012, fomc participants expect that economic activity will pick up gradually as these headwinds fade, supported by a continuation of the highly accommodative stance for monetary policy. with output growth in 2012 projected to remain close to its longer - run trend, participants did not anticipate further substantial declines in the unemployment rate over the course of this year. looking beyond this year, fomc participants expect the unemployment rate to continue to edge down only slowly toward levels consistent with the committee ’ s statutory mandate. in light of the somewhat different signals received recently from the labor market than from indicators of final demand and production, however, it will be especially important to evaluate incoming information to assess the underlying pace of economic recovery. at our january meeting, participants agreed that strains in global financial markets posed significant downside risks to the economic outlook. investors ’ concerns about fiscal deficits and the levels of government debt in a number of european countries have led to substantial increases in sovereign borrowing costs, stresses in the european banking system, and associated reductions in the availability of credit and economic activity in the euro area. to help prevent strains in europe from spilling over to the u. s. economy, the federal reserve in november agreed to extend and to modify the terms of its swap lines with other major central banks, and it continues to monitor the european exposures of u. s. financial institutions. see table 1, “ economic projections of federal reserve board members and federal reserve bank presidents, january 2012, ” of the summary of economic projections available at board of governors of the federal reserve system ( 2012 ), “ federal reserve board and federal open market committee release economic projections from the january 24 – 25 fomc meeting, ” press release, january 25 ; also available in part 4 of the february 2012 monetary policy report to the congress. ben s. bernanke ( 2011 ), “ semiannual monetary policy report to the congress, ” statement before the committee on financial services, u. s. house of representatives, july 13. bis central bankers ’ speeches a number of constructive policy actions have been taken of late in europe, including the european central bank ’ s program to extend three - year collateralized loans to european financial institutions. most recently, european policymakers agreed on a

ben s bernanke : semiannual monetary policy report to the congress testimony by mr ben s bernanke, chairman of the board of governors of the federal reserve system, before the committee on financial services, us house of representatives, 29 february 2012. * * * chairman bachus, ranking member frank, and other members of the committee, i am pleased to present the federal reserve ’ s semiannual monetary policy report to the congress. i will begin with a discussion of current economic conditions and the outlook and then turn to monetary policy. the economic outlook the recovery of the u. s. economy continues, but the pace of expansion has been uneven and modest by historical standards. after minimal gains in the first half of last year, real gross domestic product ( gdp ) increased at a 2 - 1 / 4 percent annual rate in the second half. 1 the limited information available for 2012 is consistent with growth proceeding, in coming quarters, at a pace close to or somewhat above the pace that was registered during the second half of last year. we have seen some positive developments in the labor market. private payroll employment has increased by 165, 000 jobs per month on average since the middle of last year, and nearly 260, 000 new private - sector jobs were added in january. the job gains in recent months have been relatively widespread across industries. in the public sector, by contrast, layoffs by state and local governments have continued. the unemployment rate hovered around 9 percent for much of last year but has moved down appreciably since september, reaching 8. 3 percent in january. new claims for unemployment insurance benefits have also moderated. the decline in the unemployment rate over the past year has been somewhat more rapid than might have been expected, given that the economy appears to have been growing during that time frame at or below its longer - term trend ; continued improvement in the job market is likely to require stronger growth in final demand and production. notwithstanding the better recent data, the job market remains far from normal : the unemployment rate remains elevated, long - term unemployment is still near record levels, and the number of persons working part time for economic reasons is very high. 2 household spending advanced moderately in the second half of last year, boosted by a fourth - quarter surge in motor vehicle purchases that was facilitated by an easing of constraints on supply related to the earthquake in japan. however, the fundamentals that support spending continue to be weak : real household income and wealth were flat in 2011,