More From Bernanke

Shawshank, VA 9/8/2011 (PennyPayDay) – At the very least it can be said that Fed boss Bernanke is polite.

In his speech today he reiterated that the economy has been weaker than anticipated and that the economic outlook has “greater downside risks” than the FOMC thought would be the case at the onset of summer. He said he is struck by the “unusual weakness in household spending”. While some of this is understandable, given the state of the labor and real estate markets, he appears to be at a loss to fully explain the situation; “Even taking into account the many financial pressures they face, households seem exceptionally cautious.

Indeed, readings on consumer confidence have fallen substantially in recent months as people have become more pessimistic about both economic conditions and their own financial prospects.” In comparison the business sector is upbeat he says. His story on inflation remains the same; he expects it to moderate and fall below the long-run comfort level and thus, not be an impediment to the Fed’s attempts to lower the jobless rate.

All that said, this is why the FOMC has pre-committed to keeping the funds rate at its current level for the next couple of years, he explained. And they could do more, if need be. They have many tools which could be used, when it is appropriate to use them. He did not however list the tools, therefore did not name any favorites and that’s because the FOMC is at odds about which, if any, should be put into play.

Bernanke and his colleagues “will consider those and other pertinent issues” when they meet in September, said the Fed boss. And at that time the FOMC will vote in favor of whatever it is Bernanke wants to do. But he is just too polite to make that clear in this, or any other, speech.

PennyPayDay Disclaimer

Distributed by Viestly