Bernanke Offers No New Measures To Boost Economy
Chairman Ben Bernanke is proposing no new steps by the Federal Reserve to boost the U.S. economy while hinting that Congress may need to act to stimulate hiring and growth.
Bernanke said Friday that while record-low interest rates will promote growth over time, the weak economy requires further help in the short run. He is speaking at an annual economic conference in Jackson Hole, Wyo.
Fed policymakers "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," Bernanke said in his prepared remarks.
Bernanke said that while the growing national debt "must urgently be addressed," the administration and Congress "should not, as a consequence, disregard the fragility of the current economic recovery."
He added, "To the fullest extent possible, our nation's tax and spending policies should increase incentives to work and to save, encourage investments in the skills of our workforce, stimulate private capital formation, promote research and development, and provide necessary public infrastructure."
Bernanke also was critical of Congress' handling of this summer's battle over raising the debt ceiling. He said it disrupted the economy, and another episode like that could have long-term negative consequences.
Analysts noted the lack of new proposals in Bernanke's speech.
"He essentially hit the ball over to fiscal authorities and said, `There's only so much we can do,"' said Aneta Markowska, senior U.S. economist at Societe Generale.
Bernanke's speech follows news that the economy grew at an annual rate of just 1 percent this spring and 0.7 percent for the first six months of the year. Only slightly healthier expansion is foreseen for the second half.
Bernanke said he's optimistic that the job market and the economy will return to full health in the long run.
Stock indexes fell sharply as the speech was released and it became clear that Bernanke was not promising new stimulus measures. The Dow Jones industrial average was down about 78 points shortly before the speech started and slumped as many as 220 points shortly after Bernanke started speaking. It recovered those losses within an hour. In mid-afternoon trading, the Dow was up 123 points, or 1 percent.
Bernanke's speech comes at a critical moment for the economy. Some economists worry that another recession might be near.
A big reason is that consumer spending has slowed. Home prices are depressed. Workers' pay is barely rising. Household debt loads remain high.
All that, compounded by Europe's debt crisis, has spooked the stock markets and unnerved consumers. Congress is focused on shrinking deficits and seems unlikely to back any new spending to try to energize the economy.
That's why many have looked with anticipation to the Fed to do more. The central bank has already kept short-term interest rates near zero for 2 1/2 years. And earlier this month, it said it would keep them there through mid-2013.
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