Bernanke predicts US economic growth buy says no new QE for now
Ben Bernanke, the Chairman of the Federal Reserve has said that there will be no new immediate stimulus measures taken to boost the US economy.
Mr Bernanke gave a keenly anticipated speech to central bankers in Jackson Hole, Wyoming on Friday. He said that the US central bank has a range of tools available to use and that these would be considered at an extended meeting next month.
In his speech, Mr Bernanke said: “A range of tools could be used to provide additional monetary stimulus.”
Mr Bernanke hinted that he thought the US government could do more to aid the US economy. He delivered his speech against the backdrop of poorly received revised US 2nd quarter GDP figures that revealed the economy grew less than reported in the first estimate. The US economy grew by an annualised rate of just one per cent between April and March, down from the first estimate of 1.3 per cent.
The US central bank’s next meeting in September is to be extended to two days to allow a fuller discussion on all of the options to help boost the economy. However, Mr Bernanke suggested in his speech that government should provide more support for the economy.
He said: "Most of the economic policies that support robust economic growth in the long run are outside the province of the central bank.
“As I have emphasised on previous occasions, without significant policy changes, the finances of the federal government will inevitably spiral out of control, risking severe economic and financial damage."
Many analysts were surprised by the strength of criticism that Mr Bernanke delivered to the government’s handling of the economy.
The Federal Reserve had already said that it plans to keep US interest rates at the current low level of between zero and 0.25 per cent until the middle of 2013.
Investors and stock markets had risen on the expectations that Mr Bernanke’s speech was going to deliver some concrete stimulus proposals, but by Thursday sentiment changed as markets saw this as less likely and fell as a result.
Although some analysts are disappointed at the lack of immediate action, some are optimistic that Mr Bernanke’s statement that the longer term prospects for the US economy are not bad is correct and that he has left the door open for an introduction of more quantitative easing at the extended meeting of the Federal reserve next month.
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