A warning of a future “fiscal crisis’‘ in the US has come from Ben Bernanke, the head of the country’s central bank. The Federal Reserve Chairman – who is coming up to his first anniversary in the job – told the US Congress that “early and meaningful” action is needed to deal with the rising costs of pensions and health programmes in view of the aging population.
Bernanke said that faced with the retirement of 78 million baby boomers from next year, the US budget deficits will be under “enormous pressure.”
The deficit has shrunk since hitting 320 billion euros in 2004. Last year it was 190 billion euros, but White House economists are predicting that this year it will rise again to 260 billion euros.
The Fed chairman said that US economic growth alone is unlikely to solve the impending problems.
Fixing them, he stressed, will take persistence and a willingness by Congress and the White House to make difficult choices.
Just before Bernanke spoke, the latest US inflation figures were released and added to the feeling among economists that the Fed will not cut interest rates soon. Despite higher oil prices the annual inflation rate fell last year to the lowest in three years.