Ben Bernanke Urges Congress to Enact its Own Economic Stimulus
The Federal Reserve will consider an additional stimulus in its September rate-setting meeting, said Chairman Ben Bernanke, speaking today from the Economic Club of Minnesota in Minneapolis. Though Bernanke made no allusions to specific policies, his remarks that inflation will be in check in coming quarters suggest the Fed might be considering a third round of quantitative easing if the economy does now improve.
Bernanke said growth in the second half of the year is likely to pick up, “with commodity prices coming off their highs and manufacturers’ problems with supply chains well along toward resolution.” However, he acknowledged that household and business confidence have been dealt a blow by the European sovereign debt crisis and recent U.S. debt ceiling debate.
Bernanke again urged Congress and the White House not to focus so much on cutting spending in the long term as to ignore their obligations to the U.S. economy in the short term. “While prompt and decisive action to put the federal government’s finances on a sustainable trajectory is urgently needed, fiscal policymakers should not, as a consequence, disregard the fragility of the economic recovery,” Bernanke said. He reiterated his earlier stance that the Fed has done what it can to reinvigorate demand, and that it is now Congress’ turn to enact policies to stabilize the economy:
“Without significant policy changes to address the increasing fiscal burdens that will be associated with the aging of the population and the ongoing rise in health-care costs, the finances of the federal government will spiral out of control in coming decades, risking severe economic and financial damage.”
In his speech, Bernanke also denied that the Fed’s easy monetary policy was responsible for damaging the fundamental reputation of the dollar, saying that the dollar will remain the world’s de facto reserve currency in large part because of the Fed’s mandate to promote employment and maintain price stability. In contrast, the European Central Bank’s sole mandate is to maintain price stability.