August 26, 2011 Fed prepared to use tools to spur growth: Bernanke
Federal Reserve Chairman Ben Bernanke on Friday stopped short of signaling further action to boost growth, but said it was critical for the economy's health to reduce long-term joblessness.
"It is clear the recovery from the crisis has been much less robust than we had hoped," he said in remarks prepared for delivery to an annual Fed retreat.
Bernanke said the Fed will meet for two days in September instead of the planned one to mull its options to provide additional monetary stimulus, among other topics.
The Fed chairman said reducing the record high level of workers who have been unemployed for six months or more would help achieve stronger U.S. economic growth.
"Under these unusual circumstances, policies that promote a stronger recovery in the near term may serve longer-term objectives as well," he said.
Federal Reserve Chairman Ben Bernanke delivered a keenly awaited speech to policymakers gathered in the mountains of Wyoming on Friday.
Following are some key points of his speech
STIMULUS OPTIONS - Bernanke disappointed investors hoping for a fresh steer on what the Fed might do next to boost the U.S. economy, saying the central bank "has a range of tools that could be used to provide additional monetary stimulus.
"We will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September, which has been scheduled for two days (the 20th and the 21st) instead of one to allow a fuller discussion," Bernanke said in the speech.
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"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."
Economists had not expected Bernanke to announce any major new measures but many had thought he would discuss the options in some detail. His speech fell short of those expectations.
BIG CONCERN ABOUT UNEMPLOYMENT - Bernanke said inflation did not pose a threat and the real problem facing the U.S. economy was its "extraordinarily high" level of long-term unemployment.
Those comments seemed to underscore the Fed's commitment to ensuring the recovery does not peter out.
"Under these unusual circumstances, policies that promote a stronger recovery in the near term may serve longer-term objectives as well," Bernanke said.
"In the short term, 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."
ECONOMIC OUTLOOK - Bernanke stuck to the Fed's view that U.S. economic growth will improve in the second half of 2011, blaming temporary factors, such as high commodity prices and Japan's earthquake disaster as "part of the reason for the weak performance of the economy in the first half.
But the scale of the crises in housing and the financial sector meant this recovery had been slower than bounce-banks from most recessions, he said.
BERNANKE URGES LAWMAKERS TO ACT ON GROWTH - Bernanke repeated his call on U.S. politicians to take the initiative to help the economy, saying "most of the economic policies that support robust economic growth in the long run are outside the province of the central bank."
While Washington needs to return the United States back to fiscal health, "fiscal policymakers should not, as a consequence, disregard the fragility of the current economic recovery."
That could add to criticism of Bernanke from within the Republican party which has blocked further stimulus by the Obama administration.
Bernanke also called for "a better process for making fiscal decisions," saying the divisive fight in Congress over how to raise the U.S. debt ceiling "disrupted financial markets and probably the economy as well..."
LONG-TERM OPTIMISM - Bernanke used the start of his speech to counter concerns among some investors that the United States and other rich economies are heading for a long-term decline.
"With respect to longer-run prospects, however, my own view is more optimistic. As I will discuss, although important problems certainly exist, the growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years. It may take some time, but we can reasonably expect to see a return to growth rates and employment levels consistent with those underlying fundamentals."
source http://www.reuters.com/
