Bernanke Outlines a Case for Additional Stimulus

Devan Biswas
31 Aug, 2012
New York City

Fed Chairman offered a forceful case for additional measures to support economic growth and improve labor markets but fell short of specifics and a clear timetable. Markets are anticipating news measures to kick in at the next meeting on September 12.

[R]2:30 PM New York – Fed Chairman offered a forceful case for additional measures to support economic growth and improve labor markets but fell short of specifics and a clear timetable. Markets are anticipating news measures to kick in at the next meeting on September 12.[/R]

Fed Chairman Ben S. Bernanke offered a forceful case for new measures to support the economic growth and highlighted the benefits of three earlier measures.

Bernanke delivered highly anticipated speech at a gathering of central bankers from around the world organized by the Federal Reserve Bank of Kansas that highlighted the benefits of the past stimulus measures.

Bernanke also cited independent studies that concluded that the collectively all previous three stimulus measures from the Fed have increased economic output by 3% and facilitated the creation of 2 million jobs.

He also cited the persistent weakness in labor markets and offered the strongest support for a clear need to do more. In his prepared statement he added that the Fed is prepared to act and provide additional policy accommodation to “promote a stronger economic recovery and sustained improvement in labor conditions in the context of price stability.”

However, Bernanke neither announced specific measures nor offered a timetable for steps but most economists have heightened expectations of new steps as early as next month.

Bernanke stressed the importance of non-traditional policies and offered a summary of benefits of forecasting Fed’s intentions of keeping the rates low. Fed has run out of traditional measures to support the economic activities and the Fed is digging deeper into unconventional measures that have never been tried.

The rate setting committee is scheduled to meet for two days ending on September 13 and many Fed observers expect the next measures to be announced then.