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Bernanke: Unemployment high, Fed can do more

September 1, 2012
By PAUL WISEMAN , THE ASSOCIATED PRESS

JACKSON HOLE, Wyo. - Chairman Ben Bernanke sent a clear message Friday that the Federal Reserve will do more to help the still-struggling U.S. economy.

His remarks left two questions: What exactly will the Fed do? And when?

Bernanke described the U.S. economy's health as "far from satisfactory" and noted that the unemployment rate, now 8.3 percent, hasn't declined since January.

Article Photos

AP PHOTO
Federal Reserve Chairman Ben Bernanke, right, and Bank of Israel Governor Stanley Fischer walk together past television cameras outside of the Jackson Hole Economic Symposium, Friday,, at Grand Teton National Park near Jackson Hole, Wyo. Bernanke made clear Friday that the Federal Reserve will do more to boost the economy because of high U.S. unemployment and an economic recovery that remains 'far from satisfactory.'

He stopped short of committing the Fed to any specific move. But in his speech to an annual Fed conference in Jackson Hole, Wyo., Bernanke said that even with interest rates already at super-lows, the Fed can do more.

He acknowledged critics' arguments that further Fed action could fan inflation and inject other risks. Yet after raising such arguments, Bernanke proceeded to knock them down.

Some economists predict the Fed will unveil some bold new step as soon as its Sept. 12-13 meeting, possibly a third round of bond purchases meant to lower long-term interest rates and encourage more borrowing and spending. That policy is called "quantitative easing," or QE.

In two rounds of QE, the Fed bought more than $2 trillion of Treasury bonds and mortgage-backed securities. Many investors have been hoping for a third round - a QE3.

"Bernanke has taken a further step along the path to more policy stimulus, most likely a third round of asset purchases (QE3) to be announced at the mid-September FOMC meeting," said Paul Dales, senior U.S. economist at Capital Economics.

 
 

 

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