Bernanke: No New Stimulus for U.S. Economy
The chairman of the U.S. Federal Reserve Ben Bernanke offered no new stimulus for the American economy today (Aug. 26), disappointing analysts and economists who had been hoping for measures to counter a slowing in growth.
In a speech during the bank’s annual meeting in the resort of Jackson Hole, Wyo., Bernanke did hint that Congress may need to act to stimulate hiring and growth, according to CBC.com.
Congress, however, has been focused on reducing the national budget deficits and less occupied with new spending to try to energize the economy. A plan lawmakers passed this month means annual deficits are expected to be reduced by $3.3 trillion over the next decade through spending cuts.
Bernanke left open the possibility of future action by the Fed, saying it “is prepared to employ its tools as appropriate to promote a stronger economic recovery.”
He announced its monetary policy committee will expand its meeting in September from one day to two in order to study and discuss options to for additional monetary stimulus.
The Fed chairman said record low interest rates will promote growth over time but that the weak economy requires further help in the short run.
His speech followed the release of a government report that the economy grew at an annual rate of just 1% this spring and 0.7% for the first six months of the year. The report predicted only slightly healthier expansion in the second half.
Bernanke said he’s optimistic that the job market and the economy will return to full health in the long run.
Indexes fell sharply as the speech was released and it became clear that Bernanke was not promising new stimulus measures, The Associated Press noted. 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. By late morning major market indexes were all trading higher, and by mid-afternoon the Dow was up 170 points.