Bernanke warns of daunting challenge over jobs
US Federal Reserve Chairman Ben Bernanke said yesterday that the US economy faced "daunting" challenges and that progress in reducing unemployment had been too slow, but he stopped short of providing a clear signal of further money printing.
Mr Bernanke said the central bank would act as necessary to strengthen the recovery, but he also said it had to weigh the costs as well as the benefits of more monetary stimulus, although he hinted the costs may be worthwhile.
"As we assess the benefits and costs of alternative policy approaches . . . we must not lose sight of the daunting economic challenges that confront our nation," Mr Bernanke said at the Kansas City Fed's annual Jackson Hole symposium.
"Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labour market conditions in a context of price stability."
That was a weaker hint of policy easing than in the minutes of the Fed's last policy meeting, but it was enough to keep alive hopes in financial markets that the US central bank would soon launch another round of bond purchases.
The lack of a clear signal of policy action led markets to see-saw in the wake of Mr Bernanke's comments, but his emphasis on the travails of the US labour market helped US stocks extend gains. Yields on US government bonds dropped and the dollar declined against the euro.
"The stagnation of the labour market is a grave concern not only because of the suffering and waste of talent," Mr Bernanke said, "but also because persistently high unemployment will wreak damage on our economy."
In response to the financial crisis and recession of 2007-2009, the Fed cut overnight interest rates to near zero and bought $2.3trn in government and mortgage securities in two separate rounds of so-called quantitative easing. (Reuters)