In a written speech to the Economic Club of Minnesota, Fed Chairman Ben Bernanke reiterated that the FOMC is willing to employ tools as appropriate in order to boost the economic recovery. However, the speech, which is very similar to that given at Jackson Hole last month, does not detail any possible actions.
Although there is an entire paragraph of the speech committed to the subject of Monetary Policy, there was no hint provided as to which of the options available to the FOMC is preferred at this time.
Bernanke writes, “…The Federal Reserve has a range of tools that could be used to provide additional monetary stimulus. We discussed the relative merits and costs of such tools at our August meeting. My FOMC colleagues and I will continue to consider those and other pertinent issues, including, of course, economic and financial developments, at our meeting in September and are prepared to employ these tools as appropriate to promote a stronger economic recovery in a context of price stability.”
One aspect of the speech did break from earlier commentary provided. Up until just recently Bernanke had said that the ills facing the U.S. economy were considered “transitory.” Today, Bernanke admitted that the problems such as the weak housing market are not merely temporary.
As he said in Jackson Hole, Bernanke wrote, "It is clear that the recovery from the crisis has been much less robust than we had hoped."
Bernanke also repeated his call for lawmakers on Capitol Hill and the White House to lend a hand to the economy. Bernanke talked about Congress implementing appropriate fiscal measures and urged that action be taken in the future to control both the national debt and the budget deficit.
The FOMC’s next meeting is scheduled for September 20-21. Speculation is that the committee will implement something called “Operation Twist” where the Fed sells short-dated bonds and buys longer-term maturities with the proceeds in order to push longer-term rates lower.
The end result appears to be that the FOMC has options available and that the options will be considered at the September meeting.
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