US Federal Reserve Chairman Ben Bernanke, in his first public foray on Wall Street, offered conflicting signals on interest rates but said the economy should keep growing at a brisk pace even if the housing market slows.
The new Fed chief said it was difficult to say why long-term rates were at such low levels and he outlined competing scenarios on what that meant for short-term rates.
"The implications for monetary policy of the recent behaviour of long-term yields are not at all clear-cut," Mr Bernanke told the Economic Club of New York.
Mr Bernanke revisited a thesis he laid out a year ago, that a "global saving glut" - an excess of savings because of a dearth of enticing investments - could be depressing rates. If this were the case, he said, the "neutral policy rate" would be lower than otherwise to keep the economy on an even keel.
But Mr Bernanke laid out other possibilities and concluded: "The bottom line for policy appears ambiguous."
One factor Mr Bernanke raised, but downplayed, was that large foreign holdings of US Treasury debt were pushing yields down. Mr Bernanke said this was not the only, or even the dominant, explanation for recent market behaviour.
While overnight rates have risen 3.5 percentage points since mid-2004, the market-set rate on 10-year US government bonds has barely budged.
Mr Bernanke said that if the low level of long-term rates reflected investors' willingness to take on more risk, it could mean financial conditions were stimulative. That, he said, would require higher short-term rates than otherwise necessary.
The Fed chief was more direct when giving his view of the state of the US economy. "Broadly speaking I think that consumer finances are consistent with continued reasonable growth in consumption and enough to keep the economy at or close to its potential output growth rates," Mr Bernanke said in answer to a question.
Even as Americans were taking on more mortgage debt, he noted their assets were also rising. "So that balance sheets in general are looking stronger," he said.
Mr Bernanke also said the large US current account deficit posed a risk but he said it was not strictly a US phenomenon. He said that the conventional G7 prescription to reducing the US current account deficit was higher US savings, more flexibility in Asian currency regimes and greater growth in Europe and Japan.
In particular, he said, it was important for there to be more demand in east Asian economies. "We have a lot of economies that are essentially running an export-led development strategy -- which I guess is fine except that everyone can't run an export-led development strategy."