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Bernanke Offers Little Guidance Other Than to Say That Fed Will Act as Needed

Posted on August 31st, 2012 | Author: Robert C. Gabrielski

Guest Bloggers: John Gabrielski

Fed Chairman Ben Bernanke delivered his remarks today at the Fed’s Annual Economic Symposium at Jackson Hole, Wyoming.  Bernanke is particularly concerned about the continued slow recovery of the labor market, stating that the “stagnation of the labor market in particular is a grave concern, not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years.”

In assessing the limited tools remaining for the Fed to address the economic condition, Bernanke stated that the Fed “must not lose sight of the daunting economic challenges that confront our nation.”  “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 labor market conditions in a context of price stability.”

It seems that jobs are the key focus of the Fed right now. Although new hires increased in the most recent July report, unemployment still remained at 8.3%. Based upon Bernanke’s focus on unemployment, if the August jobs numbers, expected on September 7th, continue to be weak with little sign of improvement, the Fed may feel like it needs to act. We may see what actions, if any, the Fed takes at its next policy meeting on September 12th and 13th. While some economists see the prospect of QE3, I’m still not sure.  As noted in my post this morning, certain sectors of the economy have been improving over the spring and summer, albeit slowly.  Consumer spending and income have increased and the housing market seems to have bottomed out. A report today showed an increase in consumer confidence with that latest August report showing a three- month high. Inflation seems to be within the Fed’s 2% target, as well. Will Bernanke “kick the can” and take no action or will the Fed initiate a new round of bond purchases – QE3? Stay tuned – we will.