Bernanke plays diplomat on next Fed moves, cautions Congress
Washington, D.C., United States (AHN) – There was a recovery in the stock market with indicators closing on a slightly higher level after dipping earlier as Federal Reserve Ben Bernanke on Friday reiterated his views that the next round of efforts to goad the economy on track are now out of the purview of the Fed.
Addressing a select audience at the Kansas City Federal Reserve Bank’s annual Jackson Hole, Wyoming, conference Bernanke urged Congress and the Obama Administration to work on the next steps to keep the ongoing feeble recovery on track and not let the recession take over.
Bernanke criticized U.S. lawmakers not only for their failure to do needful to generate jobs but also for their political bickering over the debt limit in the recent times.
Mincing no words, the Fed Chairman cautioned the lawmakers, “The negotiations that took place over the summer disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses.”
“Although the issue of fiscal sustainability must urgently be addressed, fiscal policy makers should not, as a consequence, disregard the fragility of the current economic recovery,” Bernanke said.
“Acting now to put in place a credible plan for reducing future deficits over the longer term, while being attentive to the implications of fiscal choices for the recovery in the near term, can help serve both objectives,” suggested Bernanke.
On the range of possible measures the Fed can take, Bernanke said, “The Federal Reserve has a range of tools that could be used to provide additional monetary stimulus.”
Referring to the Federal Open Market Committee (FOMC) meeting next month, the Fed Chair said, “We discussed the relative merits and costs of such tools at our August meeting. We will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September.”
“The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability,” hoped the Fed Chair.
Citing that the U.S. “economy is suffering today from an extraordinarily high level of long-term unemployment, with nearly half of the unemployed having been out of work for more than six months,” Bernanke said, “policies that promote a stronger recovery in the near term may serve longer-term objectives as well.”
For the short term, Bernanke suggested, “putting people back to work reduces the hardships inflicted by difficult economic times and helps ensure that our economy is producing at its full potential rather than leaving productive resources fallow.”
“In the longer term, minimizing the duration of unemployment supports a healthy economy by avoiding some of the erosion of skills and loss of attachment to the labor force,” the Fed Chair said.
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