Bernanke Proposes No New Steps to Boost Economy

Federal Reserve Chairman Ben Bernanke leaned on Congress on Friday to do more to promote hiring and growth, or risk delaying the economy's return to full health.

Bernanke proposed no new steps by the Fed to boost the economy. But at a time when Congress has been focused on shrinking long-run budget deficits, he warned lawmakers not to "disregard the fragility of the current economic recovery."

Bernanke, who spoke at an annual economic conference in Jackson Hole, left open the possibility that the Fed will take further steps to strengthen the economy. He said its September policy meeting will be held over two days, instead of just one, to allow for a "fuller discussion."

But analysts said the speech provided no assurances of any new help from the Fed.

"He appears to be saying that the Fed has largely played its part and that the politicians need to step up their game," said Paul Dales, senior U.S. economist at Capital Economics.

Stocks fell after the speech was released but then recovered. The Dow Jones industrial average rose about 150 points in early-afternoon trading as traders responded to Bernanke's judgment that the job market and the economy would return to full health in the long run.

Bernanke's speech followed news that the economy grew more slowly in the April-June quarter than previously estimated - a meager 1 percent annual rate.

Some economists worry that Europe's financial crisis, along with persistently weak U.S. job growth and falling home prices, could tip the economy into another recession. Those fears have pulled down stock prices in the past month. The Dow has lost 12 percent of its value since late July.

The sell-off on Wall Street was triggered Congress's battle over raising the debt ceiling. In his speech, Bernanke criticized lawmakers for their handling of the issue and warned that further standoffs could hurt the economy in the long run.

A plan Congress passed this month means annual deficits are expected to be reduced by $3.3 trillion over the next decade through spending cuts.

The Fed chairman said long-term deficit reduction is necessary. But he said that future economic health could be jeopardized if hiring and growth are not strengthened now.

Analysts noted the lack of new proposals in Bernanke's speech.

But Aneta Markowska, senior U.S. economist at Societe Generale, said the extension of the Fed's September meeting to two days might suggest something new could be unveiled.

Many have looked with anticipation to the Fed to do more. It has already kept short-term interest rates near zero for 2½ years. And earlier this month, it said it would keep them there through mid-2013.

"I'm a little fearful that there are a lot of expectations built in that I don't think Bernanke can deliver on," said Jack Ablin, chief investment officer at Harris Private Bank.

To promote growth, Bernanke said the government must pursue tax, trade, and regulatory policies that encourage economic health.

The approach of this year's Jackson Hole conference raised expectations. In last year's speech, Bernanke signaled that the Fed might unveil a Treasury-buying plan to help lower long-term rates. In November, the Fed announced a $600 billion such program. The bond purchases were intended to lower long-term rates, lift stock prices and spur more spending.

Immediately afterward, stock prices started rising and continued up until May, when they leveled out.

Still, critics, from congressional Republicans to some Fed officials, have raised concerns that the Fed's Treasury purchases could ignite inflation and speculative buying on Wall Street, while doing little to aid the economy.

Others have wondered whether any further lowering of long-term rates is needed. Investors seeking the safety of U.S. debt have forced down the yield on the 10-year Treasury note to 2.19 percent - a full point lower than it was when the Fed completed its Treasury purchases about two months ago. Yet the economy is still sputtering.

The Congressional Budget Office this week estimated that the unemployment rate will hover around 8.5 percent when President Barack Obama seeks re-election next year. And it predicts that unemployment will stay above 8 percent through 2013.

That continued weakness is why many speculated that the Fed would still embark on some new plan to help the economy. They note that while inflation has risen, it's still within the Fed's target range.

At their meeting earlier this month, Bernanke said policymakers discussed the "relative merits and costs" of further steps to spur growth. Clues to where the Fed is leaning might be found in those meeting's minutes, which will be released Tuesday. "There could be more action, but we're in treacherous waters right now," said John Silvia, Wells Fargo's chief economist. "What he's doing is making small moves." Many economists note, however, that the economy's main problem is not that interest rates are too high. They say the main problem is that consumer spending remains too weak. So businesses feel little incentive to hire, expand and invest. Until demand for goods and services steps up, the Fed may have limited ability to strengthen the economy. Joshua Shapiro, an economist at MFR Inc., said that by dwelling on budget and tax issues facing Congress, Bernanke was conceding that the Fed has "basically exhausted its tools."

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BERNANKE 2011 MEETINGS: Economic Collapse - Imminent Global Financial Crisis and U.S. Dollar Collapse!

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This is a must see video... you have you prepare yourself and your loved ones before it's too late.

I'm posting my blog video here because I need to reach out to the real people who are effected by the Global Economic Crisis.

August 30 2011 at 9:41 PM Report abuse rate up rate down Reply

iT'S simple get controll of gas prices and energy and watch the economy take off. What is fair price for a gallon of gas easy 2.50 the American economy would boom and if nothing is done its the same old same economy nothing!!!

August 29 2011 at 6:44 AM Report abuse rate up rate down Reply

You could start using 10 cent bullets on illegal immigrants coming across the border instead of paying tens of thousands to each one once they arrive and pop out a half dozen the expense of the American taxpayer!

August 28 2011 at 9:26 PM Report abuse +1 rate up rate down Reply

We no longer for some time report the m1 .This is the printing of our money supply. We have flooded the market with trillion of dollars.We say we would not devalue the dollar in fact we did .They have done as much as it can be done but there little they can do in the job creation. Next we will have hyper inflation leading to more lost jobs.

August 27 2011 at 10:10 PM Report abuse +2 rate up rate down Reply
1 reply to qwa707's comment

Geithner and The BerNank said that they would not monetize the debt by printing money and devaluing the dollar. Both work for whack jobs, One is a liar and a tax cheat and the other is a double dog dare ya liar liar pants on fire liar who printed money to buy our own debt because no one else would and then they both were shocked when the credit rating of the USA was downgraded after telling us the month before that a downgrade was not going to happen and that it was impossible for it to happen.

Still, as liars go, both added together don't hold a candle to the Master Messiah who turned out to be a pathological liar like most socialists and Marxists passing themsleves off as progressives.

August 28 2011 at 12:12 AM Report abuse +1 rate up rate down Reply

What happened, this administration run out of ideas??

August 27 2011 at 7:19 PM Report abuse +3 rate up rate down Reply
1 reply to somerscollc's comment

That's the new "hope"!

August 28 2011 at 1:15 PM Report abuse +2 rate up rate down Reply

This all started when bush got into office SR then JR

August 27 2011 at 6:06 PM Report abuse -4 rate up rate down Reply
Hi Catmom!

Well once again the current administration is showing the ugly side of out of touch with America. Small businesses need help. And once again they are denied. Same thing that happened in the Great Depression where the government stood by and did nothing.

August 27 2011 at 4:28 PM Report abuse +5 rate up rate down Reply

Ok we are going to do it again just Like 1930, restrict credit to small business, cut spending, raise taxes, and of course try to Balance the Budget during a recession. That should get us back into a good old Great Depression. Weed out the weak and get rid of the middle class. Thank all of you in advance for your help. RICHY RICH.

August 27 2011 at 4:14 PM Report abuse -1 rate up rate down Reply

Obama and Bernanke are completely out fof touch with America and Businesses. Bank are not loaning any money due to Obama's Hazarous running the country and wanting to raise taxes and more regulations. We could easily go to 50% unemployment and the banks know that. Banks understand businesses must be comfortable to extend themselves in hiring and investing. Simply the business world have no ideal where Obama is going and they can't believe him as they have heard way to many lies from Obama.
Companies are not hiring because no one can reasonably predict future costs of energy. Obama cut out drilling and in the Gulf they laid off 187,000 people. Open drilling would immediately start more real jobs and more income tax that would stay here in America. Regulations yet to be written, entitlements and lack of leadership by the current occupant of our White House, as well as the every growing debt. Raising taxes has the nothing to do with unemployment, we have a spending problem, not a revenue issue.
You want to just print money to cover the cost, comparing that to a savings when compared to the stimulus which was a total waste delaying the inevitable. Just casually dismissing the effect of inflation by printing money doesn't make it happen. Where is your support that the government makes money on mortgage backed securities? I suggest you review what Obama has done to the country and why employers are shutting down and leaving America.

August 27 2011 at 3:52 PM Report abuse +3 rate up rate down Reply
1 reply to COMMON SENSE's comment
Chuck Crow

Jim, you said it just the way it needed to be said. I would add that this is not a cash problem, there is more than enough cash out there already, companies are afraid to let it go and banks are under so many new regulations they are afraid to loan. What we need is for the government to get the hell out of the way.

Thanks for giving me some feeling that others are on the same page as me.

August 27 2011 at 5:59 PM Report abuse rate up rate down Reply

AARP is asleep at the switches??

August 27 2011 at 3:44 PM Report abuse +1 rate up rate down Reply