Federal Reserve chairman Ben S. Bernanke clearly stated that he wouldn’t rule out any attempt, including bond purchases (AKA QEIII), that can reduce the unemployment rate and help the economy grow.
Ben Bernanke said the present economic growth is far from satisfactory. He was speaking at an annual conference in Jackson Hole, Wyoming. Corporate America and economists keep a close watch on the event, as it hints about the shape of future Federal monetary policies.
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“We must not lose sight of the daunting economic challenges that confront our nation,” Ben Bernanke said. “The stagnation of the labor market in particular is a grave concern, not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years.”
In a Federal Open Market Committee meeting to be held in September, the Federal Reserve will decide whether the economy should be given further stimulus to spur growth and bring the unemployment rate down. Bernanke said the two biggest drags on the US economy are the European financial crisis and the U.S. tax hikes & spending cuts.
Unemployment rates are unlikely to come down, unless the economy starts growing at a faster pace. 127,000 new jobs were added in August, lower than 163,000 jobs in July, according to a Bloomberg report. National GDP expanded at 1.7 percent during the second quarter this year. Cooling growth can make the US economy more vulnerable to the Eurozone crisis.
Manufacturing, housing and retail sales have shown some improvements. Consumer spending has increased for the first time in three months. In July, retail sales jumped 0.8 percent, the highest in five months. The sales of existing houses rose for the first time in eight months. However, Bernanke said that these signs of strength are not sufficient for long-term growth.
Bernanke’s speech will have a strong effect on politics and economy. The Federal Reserve has been heavily criticized by many. Mitt Romney said on August 23, during an interview with Fox Business Network, that he wouldn’t even think of re-appointing Ben Bernanke. The Republican lawmakers also said that the Fed should show “humility” by holding back from any new program to stimulate growth.