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, washington, dc, 17 july 2013. * * * chairman hensarling, ranking member waters, and other members of the committee, i am pleased to present the federal reserve ’ s semiannual monetary policy report to the congress. i will discuss current economic conditions and the outlook and then turn to monetary policy. i ’ ll finish with a short summary of our ongoing work on regulatory reform. the economic outlook the economic recovery has continued at a moderate pace in recent quarters despite the strong headwinds created by federal fiscal policy. housing has contributed significantly to recent gains in economic activity. home sales, house prices, and residential construction have moved up over the past year, supported by low mortgage rates and improved confidence in both the housing market and the economy. rising housing construction and home sales are adding to job growth, and substantial increases in home prices are bolstering household finances and consumer spending while reducing the number of homeowners with underwater mortgages. housing activity and prices seem likely to continue to recover, notwithstanding the recent increases in mortgage rates, but it will be important to monitor developments in this sector carefully. conditions in the labor market are improving gradually. the unemployment rate stood at 7. 6 percent in june, about a half percentage point lower than in the months before the federal open market committee ( fomc ) initiated its current asset purchase program in september. nonfarm payroll employment has increased by an average of about 200, 000 jobs per month so far this year. despite these gains, the jobs situation is far from satisfactory, as the unemployment rate remains well above its longer - run normal level, and rates of underemployment and long - term unemployment are still much too high. meanwhile, consumer price inflation has been running below the committee ’ s longer - run objective of 2 percent. the price index for personal consumption expenditures rose only 1 percent over the year ending in may. this softness reflects in part some factors that are likely to be transitory. moreover, measures of longer - term inflation expectations have generally remained stable, which should help move inflation back up toward 2 percent. however, the committee is certainly aware that very low inflation poses risks to economic performance – for example, by raising the real cost of capital investment – and increases

street reform and consumer protection act of 2010 ( dodd - frank act ) are specifically targeted at these firms. it would be counterproductive to apply those same expectations to small banks. accordingly, we think it is important to tailor rules whenever possible to clearly differentiate expectations for different portfolios of banks and reduce undue burden on community banks. tailoring regulations may be more challenging in some areas, such as rules that provide transparency and fairness in consumer transactions. those are standards that apply throughout the financial system. i should note that the dodd - frank act transferred rule - writing authority for many of the consumer laws and regulations to the consumer financial protection bureau, or cfpb. the review of those regulations must be undertaken by the cfpb under procedures incorporated in the dodd - frank act rather than egrpra. however, the federal reserve board, the office of the comptroller of the currency, and the federal deposit insurance corporation retained rule - writing authority for the community reinvestment act, and we are interested in your comments regarding ways we can improve the regulation. bis central bankers ’ speeches in addition to changes in the regulatory and supervisory landscape, the banking industry itself has also undergone major changes. advances in technology and shifts in industry composition between depository institutions and nondepository companies have changed the types of financial services and products that are offered, as well as how those services and products are accessed. we will be very interested in your feedback regarding how these types of industry changes have impacted the effectiveness of our regulations. let me conclude by saying that we will consider your comments carefully as the agencies coordinate to discuss and consider the appropriate action that is likely to best serve our financial system and the interests of institutions and consumers. the result will be contained in the agencies ’ report to the congress summarizing the issues raised and the agencies ’ conclusions about the need for regulatory or legislative changes. thank you for joining us today. bis central bankers ’ speeches