Home Business Ben Bernanke Favors Continuance Of Fed’s Stimulus

Ben Bernanke Favors Continuance Of Fed’s Stimulus

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Federal Reserve Chairman Ben Bernanke indicated the U.S. economy still needs low interest rate policies, amid high unemployment and low inflation.

Ben Bernanke Favors Continuance Of Fed's Stimulus

Bernanke called for maintaining highly accommodative policy for the foreseeable future during the National Bureau of Economic Research conference.

Interestingly, Bernanke’s comments came yesterday soon after the central bank released minutes of the June 18-19 meeting wherein nearly half of the 19 participants in the Federal Open Market Committee favored a halt to $85 billion monthly purchase program by year end.

Ben Bernanke – High Unemployment And Low Inflation

The Federal Reserve Chairman said the 7.6 percent unemployment rate probably overstates the health of the labor market, while inflation remains below FED’s target of 2 percent.

With FED failing on both sides of its dual mandate, the need for continuance of the accommodative policy persists.

Bernanke indicated that policy makers are ‘somewhat optimistic about the economy as the housing has shown positive trend and household balance sheets posted some improvement.

Bernanke also eschewed optimism on the recent trends in rising auto sales.

Accommodation Could Stretch To Next Year

The Federal Reserve Chairman Bernanke indicated during the National Bureau of Economic Research conference that if the factors jeopardizing the FED’s capacity to achieve its dual mandate, accommodation could persist ‘for the remainder of this year and into next year’.

Markets across the globe have recently sold off amid fears that the Federal Reserve may begin to taper its monthly $85 billion bond buying program very soon.

Joshua Zumbrun, Craig Torres & Steve Matthews in their report for Bloomberg feel the Fed policy makers don’t plan to update their economic forecasts when they meet during this month end. Besides, Bernanke is not scheduled to hold a press conference until after their September 17-18 meeting. It is expected job reports for July and August would be reviewed during the meeting by FOMC.

After Bernanke’s recent remarks, global markets have posted good gain. Asian markets ended with big gains, while European markets posted less than 1 percent gain in midday trading. Mirroring the global trends, U.S. stock futures were also up about 1 percent.

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