Bernanke talks of possible stimulus from Fed

Jackson Hole, WY, United States (4E) – Federal Reserve Chairman Ben Bernanke said during a keenly awaited speech on Friday that the Fed is ready to infuse more stimulus to the economy given the serious implication posed by the stagnating labor market.

Speaking at Jackson Hole, Wyoming in the central bank summit, Bernanke stood by his earlier position that the Federal Open Market Committee (FOMC) is prepared for more action that would stimulate the economy although no decision yet on another round of quantitative easing.

The Fed Chairman’s position is in line with what appears in the minutes of the Fed’s policy meeting in August where members are increasingly leaning toward taking action should the economy continue with its anemic performance.

In the annual forum attended by central bankers and economists, Bernanke urged policy makers that the economic conditions may require “nontraditional policies” as solutions. The FOMC will meet in two weeks time to decide whether there is a need for the Fed to step in and expand its stimulus measures to help spur the economy.

In his speech, Bernanke reiterated the Fed’s mandate to reduce unemployment, signalling that the Fed perhaps may do something within the next several weeks.

Unemployment climbed back to 8.3 per cent, prompting the Fed chief to use the language “grave concern” in describing the labor market while stating that the state of the U.S. economy is “far from satisfactory.”

People have been anticipating what Bernanke will say in Jackson Hole as the previous two conferences signaled central bank action for stimulus. In August 2010, Bernanke talked about how the central bank must do “all that it can” to support the economic recovery and proposed to purchase securities if growth ever slowed down. In November 2010, a $600bn Treasury purchasing program was launched.

Despite the anticipation for a possible third round of quantitative easing, economists and investment strategists are mixed on its actual impact in lifting the economy or the equity markets.

Bernanke, on the other hand, is convinced that Fed action can help boost the economy.

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