The U.S. central bank is ready to act in order to
help the country's troubled economy, Federal Reserve chairman Ben
Bernanke said Friday without announcing concrete plans.
In a much-anticipated speech in Jackson Hole, Wyo., Bernanke
said only that the Federal Open Market Committee will, in its meeting
in September, "continue to assess the economic outlook."
"I can certainly appreciate these concerns and am fully aware of
the challenges that we face in restoring economic and financial
conditions conducive to healthy growth," he said.
Bernanke said, however, that his own view was "more optimistic."
"Although important problems certainly exist, the growth
fundamentals of the United States do not appear to have been
permanently altered by the shocks of the past four years. It may take
some time, but we can reasonably expect to see a return to growth
rates and employment levels consistent with those underlying
fundamentals."
Bernanke admitted that recovery from the recent recession has been
"much less robust" than the Fed hoped.
"The recession was even deeper and the recovery even weaker than
we had thought; indeed, aggregate output in the United States still
has not returned to the level that it attained before the crisis."
"The recession, besides being extraordinarily severe as well as
global in scope, was also unusual in being associated with both a
very deep slump in the housing market and a historic financial
crisis. These two features of the downturn, individually and in
combination, have acted to slow the natural recovery process," he
said.
The U.S. Department of Commerce corrected downward Friday its
estimated growth figures for the second quarter. Over that period,
the country's GDP grew by only 1 percent, compared to the previous
estimate of 1.3 percent.
In the first quarter, the U.S. economy had grown by only 0.4 percent, putting the total growth for the first half of the year at the
lowest level for any such period since recovery began in mid-2009.
However, Bernanke stressed his belief that "growth in the second
half looks likely to improve."
He also left no doubt that the Fed will intervene in the economy
if it believes that to be necessary. The bank, he stressed, remains
committed to doing "all that it can to help restore high rates of
growth and employment in a context of price stability."
"The Federal Reserve has a range of tools that could be used to
provide additional monetary stimulus," he said, without mentioning
concrete measures.
Some market agents had hoped that Bernanke would announce specific
steps to boost the economy, and also the sagging financial markets.
In a similar appearance last year, he had announced the second stage
of a programme whereby the Fed would buy back bonds worth billions of
dollars.
The programme, which led the bank to inject 600 billion dollars
into the market November-June, gave a huge boost to Wall Street.
There was speculation, for example, that the Fed might announce a
third stage of this Quantitative Easing program, with a view to
bracing low interest rates and to countering the economy's current
weakness.
"The healing process should not leave major scars. Notwithstanding
the trauma of the crisis and the recession, the U.S. economy remains
the largest in the world, with a highly diverse mix of industries and
a degree of international competitiveness that, if anything, has
improved in recent years," Bernanke said.
He was, however, unusually outspoken in his criticism of recent
talks to increase the ceiling on U.S. debt.
"The country would be well served by a better process for making
fiscal decisions," he said.
Fiscal policymakers should not "disregard the fragility of the
current economic recovery," Bernanke stressed.
"The negotiations that took place over the summer disrupted
financial markets and probably the economy as well, and similar
events in the future could, over time, seriously jeopardize the
willingness of investors around the world to hold US financial assets
or to make direct investments in job-creating US businesses."
