Bernanke Says the Fed Will Do More About High Unemployment

Ben BernankeBy PAUL WISEMAN

JACKSON HOLE, Wyo. (AP) - Chairman Ben Bernanke made clear Friday 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.

After Bernanke's comments were released at 10 a.m. Eastern time, stocks initially gave up most of their earlier gains. But as investors digested the speech, stocks bounced back. By late morning, the Dow Jones industrial average was up more than 100 points. Broader stock indexes also surged.

Bernanke 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, he said.

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 next policy meeting in September.

In light of Bernanke's comments Friday, 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.

"This is really all he could say," says Steven Ricchiuto, chief economist at Mizuho Securities. "He is not at liberty to promise anything without the (policy) committee's approval, and there seems to be various opinions on the committee about the best way forward."

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."

That remark echoed what the Fed had said in a statement after its most recent policy meeting, July 31-Aug. 1. Since then, somewhat stronger economic news had led some analysts to say the Fed might now feel less urgency to act. But Bernanke's reiteration Friday of the Fed's readiness to provide more help suggested that his economic outlook remains dim.

The U.S. economy is still struggling to grow. It expanded at a tepid 1.7 percent annual rate in the April-June quarter, the government estimated Wednesday.

The minutes of the Fed's July 31-Aug. 1 policy meeting showed that officials spoke with increased urgency about the need to provide more help for the U.S. economy.

The policy committee decided that action "would likely be warranted fairly soon" unless it saw evidence of "a substantial and sustainable strengthening" of the economy. After it meets in mid-September, the Fed's policy committee will meet once more, in late October, before the November elections.

QE3 isn't the Fed's only option. It already plans to keep short-term interest rates near zero through late 2014 unless the economy improves. It could settle for extending that pledge into 2015.

Mark Zandi, chief economist at Moody's Analytics, is among those who think the Fed will extend its timetable for record-low rates into 2015 at the September policy meeting. And unless the economy improves, Zandi expects the Fed to launch another round of bond purchases after the election.

Bernanke's comments Friday made clear that the economy has a long way back to full health.

"Unless the economy begins to grow more quickly than it has recently, the unemployment rate is likely to remain far above levels consistent with maximum employment for some time," he said.

At the end of every August, economists and central bankers convene in the Rocky Mountains at a symposium organized by the Federal Reserve Bank of Kansas City. They present papers and argue about economic issues. But mostly, they wait to see what the Fed chairman has to say.

In August 2010, Bernanke hinted during his remarks at Jackson Hole that the Fed might begin a second round of bond purchases, a policy called quantitative easing, or QE2. The Fed started buying bonds three months later.

Many analysts think a third round of bond purchases - QE3 - would include both Treasurys and mortgage-backed securities.


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pischotta

Yes, sure they will. Make it higher according to the game plan of the Obama administration.

September 04 2012 at 2:49 PM Report abuse rate up rate down Reply
pischotta

Yes, sure they will. Make it higher according to the game plan of the Obama administration.

September 04 2012 at 2:49 PM Report abuse rate up rate down Reply
dus48

gold prices are going up.we are printing faster than we can count.and we dare question about the economy.well folks we are in for a bumpy ride.and so they make us beleive that everything is dandy.

September 04 2012 at 12:59 PM Report abuse +1 rate up rate down Reply
dus48

gold prices are going up.we are printing faster than we can count.and we dare question about the economy.well folks we are in for a bumpy ride.and so they make us beleive that everything is dandy.

September 04 2012 at 12:59 PM Report abuse +1 rate up rate down Reply
ohmyboehnertwo

a4monthsocrapleft
MUSLIM CLOWN ==OBSTRUCTIONIST
=====================================================================
The method Republicans have used to block all jobs legislation in the past two years is the same. A jobs bill comes up, it is filled with positive things for the economy, Republicans filibuster debate, this shields them from having to make floor speeches on why they don't want tax breaks for small businesses... etc.

Why? Well, if the economy recovers too strongly before an election, Republicans will lose power. If jobs numbers look too good, people will want to keep the same party. By Republicans blocking all jobs legislation and keeping jobs numbers from improving they believe this is their ticket to power.

In other words, if you and other Americans suffer just long enough it will pay off for Republicans.

They sacrifice the citizens' jobs with the hopes that they will create more Republican jobs in Congress.

Read Benjamin Feinblum's blog, Team America.

Americans want the jobs numbers to improve and are beginning to wise up to the reality that Republicans are blocking jobs measures that citizens are strongly in favor of. Coverage of Republicans tactic of blocking all jobs bills is increasing because the media has begun to realize what is happening. Now, Republicans face a major backlash from the American public as their power grabbing scheme is becoming more visible.

They knew years ago that the election would be based on the economy and job creation. So, they held it off.

More Americans are realizing that Republicans have worked for several years to undermine the president in every way possible. Americans believe that it requires a complete lack of patriotism to take such actions during a massive economic collapse. They are beginning to ask, "Who in their right mind would block any job creating plan to bring us out of this crisis because they want power?"

Well, that answer is simple - they stated their mission two years ago. Here is the Republican leader of the Senate - Mitch McConnell. Now, the 19th jobs bill has been just blocked.


Congress's approval rating is at record lows and wiser Americans are beginning to become vocal about getting Republicans out of office.

Today that method was repeated for the 19th time in two years.

Note: This article is all inclusive. You can view the entire list of jobs bills blocked. You can view data on the impact of the stimulus and other jobs measures. You can also see why America is primed for job growth that will occur the moment Republicans in Congress allow jobs bills to pass.

Do you think Republicans face a backlash as Americans are figuring this out?

The Bring Jobs Home Act

The bill was called the, "Bring Jobs Home Act." It would have provided a 20% tax break for the costs of moving jobs back to the U.S. It removes tax deductions for the business expenses of jobs moving overseas. Simple enough.

Stop incentivizing jobs leaving the U.S. Start incentivizing jobs returning to the U.S. Fund it within the bill by taking away deductions for companies shipping jobs overeas. This way, it doesn't add to the deficit.

The president can never directly bring the jobs back. However, he and Congress can create the conditions through policy that create job magnetism.

This is the most common sense solution on the planet to create the conditions to draw jobs home.

Americans now realize that Republicans just voted to protect companies that outsource jobs. Maybe, citizens won't want Republican leadership in Congress anymore given how they have used their time.

Note: Four Republicans voted for the law believing it was too good for America to play politics with. 42 Republicans voted to obstruct.

Again, I am not talking about a vote on the merits of the law that were blocked. I am talking about filibustering debate. Jobs measures are too important for Republicans to speak about on record.

The Payroll Tax Cut Renewal

This tax cut reaches 160 million people and stimulates demand by leaving money in consumers hands. Watch the GOP refuse to allow Democrats to propose compromises on the measure. Economists call this one of the most stimulative possible approaches for increasing jobs in the economy.

Watch as the Republican speaker leaves the floor refusing to talk about jobs legislation.

September 04 2012 at 11:00 AM Report abuse +3 rate up rate down Reply
1 reply to ohmyboehnertwo's comment
ohmyboehnertwo

MUSLIM CLOWNS=REPUBLICANS

September 04 2012 at 11:02 AM Report abuse rate up rate down Reply
Peter Ponce De Leon

Bernanke will continue to send the price of oil, gold , silver and most other commodities deemed as inflation hedges to the moon. Then of course food and energy will go along for the ride and we will all be more poor. This dude makes me so furious...

September 04 2012 at 12:12 AM Report abuse rate up rate down Reply
Peter Ponce De Leon

Bernanke will continue to send the price of oil, gold , silver and most other commodities deemed as inflation hedges to the moon. Then of course food and energy will go along for the ride and we will all be more poor. This dude makes me so furious...

September 04 2012 at 12:12 AM Report abuse rate up rate down Reply
pischotta

Obama is su ck a good president.

September 02 2012 at 11:19 PM Report abuse +1 rate up rate down Reply
pischotta

Obama is suck a good president.

September 02 2012 at 11:18 PM Report abuse rate up rate down Reply
pischotta

Fire the moron, just like the one on 1600 penciltuckey avenue !

September 02 2012 at 11:12 PM Report abuse rate up rate down Reply