JACKSON HOLE, Wyo. (AP) — Chairman Ben Bernanke made clear today 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 also argued that the Fed’s moves so far to keep interest rates at record lows and encourage borrowing and spending have helped bolster the economy.
Bernanke stopped short of committing the Fed to any specific move, such as another round of bond purchases to lower long-term rates.
But in a speech at an annual Fed conference in Jackson Hole, Wyo., Bernanke said that even with rates at super-lows, the Fed can do more.
He noted that further action carries risks but says the Fed can manage them. The Fed “should not rule out” new policies to improve the job market, Bernanke says.
The most dramatic step the Fed could take would be another round of bond buying. This is known as 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 — QE3— to be unveiled as soon as the Fed’s September policy meeting.
In light of Bernanke’s comments today, some analysts said that might be a stronger possibility now.
“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.
At the same time, the Fed chairman avoided hinting of any one policy move or any timetable.
In his speech, Bernanke cited studies showing the Fed’s first two rounds of bond purchases created at least 2 million jobs.
“It is important to achieve further progress, particularly in the labor market,” Bernanke said. “The Federal Reserve will provide additional policy accommodation as needed.”