The head of the US central bank, Ben Bernanke,
is not ruling out further monetary measures to spur the under
performing US economy, according to the text of a speech he is due to
deliver later Friday.
Referring to growth that has been "tepid" in recent quarters and an economic situation that is "far from satisfactory," Bernanke repeated his statement that the central bank would "provide additional policy accommodation as needed" to spur growth.
Bernanke was to speak Friday to central bankers and economists at an annual forum in Jackson Hole, Wyoming, two weeks ahead of the next meeting of the Federal Open Market Committee.
Additional policy accommodation means large scale purchases of assets, a tactic the Federal Reserve has tried twice with no appreciable reduction in the jobless rate.
In the text of his speech, Bernanke said it would be done "as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability."
The US unemployment rate, which fell in July to 8.3 per cent, was still more than 2 percentage points above what most members of the market committee consider normal, he said, expressing dismay that other indicators, such as the number of people forced into part-time jobs, confirm that labour force utilization remains very low.
Unless the economy begins to grow more quickly, the unemployment rate is likely to remain far above a maximum employment level for some time, Bernanke writes.
"I have noted on other occasions that the declines in unemployment we have seen would likely continue only if economic growth picked up to a rate above its longer-term trend," the text says. "In fact, growth in recent quarters has been tepid, and so, not surprisingly, we have seen no net improvement in the unemployment rate since January."
The text refers to this as a stagnation in the labour market and said it was a "grave concern" because it caused suffering, wasted human talent and could cause lasting structural damage to the economy.
Bernanke said some economists have interpreted the lack of progress despite central bank policy actions as evidence that the financial crisis already has caused structural damage to the economy, rendering the current levels of unemployment "impervious to additional monetary accommodation."
However, he concludes more positively that following every previous US recession since World War Two, the unemployment rate has returned to a level close to its pre-recession level.
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