Debt Woes
Europe's debt woes added to the market turmoil. Central bankers and finance ministers from the Group of Seven nations pledged Aug. 7 to "take all necessary measures to support financial stability and growth."
The next day, the European Central Bank began buying Italian and Spanish bonds in its riskiest attempt yet to battle the continent's sovereign debt crisis.
While U.S. inflation rates have risen, they are still below the Fed's informal target range of 1.7 to 2 percent. A measure of consumer-price gains, stripping out food and energy, stood at 1.3 percent for the 12 months ending in June. That's up from 0.9 percent for the 12 months ending December.
Bernanke told Congress on July 13 that the Fed was prepared to buy more Treasury bonds if the economy appeared in danger of stalling or if the threat of deflation looked like it was going to re-emerge, while repeating his forecast for a pickup in growth in the second half of the year.
Recent Data
Recent economic data have cast doubt on his outlook.
Gross domestic product expanded at a 1.3 percent annual pace in the second quarter, less than forecast by economists, a July 29 government report showed. The economy almost stalled in the prior quarter, growing at a 0.4 percent pace, the weakest three-month period since the recovery began in June 2009.
The same report showed that the recession was about 25 percent deeper than previously estimated, leaving GDP short of its 2007 peak and the economy more vulnerable to another contraction.
Consumers cut spending in June for the first time in almost two years, the Commerce Department said Aug. 2.