Bernanke urges Congress to spur economy
At summit, he suggests Fed may take steps later
JACKSON HOLE, Wyo. – Federal Reserve Chairman Ben Bernanke has a message for Congress: Do more to stimulate hiring and growth, or risk delaying the economy’s return to full health.
Bernanke held out the prospect Friday that the Fed may take further steps later to help the economy. But he offered no new plans for now.
At a time when Congress has focused on shrinking budget deficits, Bernanke agreed that doing so is important for the long term. But he warned lawmakers not to “disregard the fragility of the current economic recovery.”
Investors had hoped Bernanke would use his speech at an economic conference in Jackson Hole to unveil some aggressive measure to jolt the economy.
He didn’t. But he did say the Fed’s September policy meeting will be extended to two days to permit a “fuller discussion” of the central bank’s options.
“He appears to be saying that the Fed has largely played its part and that the politicians need to step up their game,” said Paul Dales, senior U.S. economist at Capital Economics.
Investors seemed to take comfort from Bernanke’s view that the job market and the economy will return to full health in the long run and the notion that the Fed might provide more help in the future. After initial losses, the Dow Jones industrial average closed up 134 points. Broader stock indexes also gained.
Bernanke blamed this summer’s political squabbling over raising the federal debt limit for undermining consumer and business confidence. And he warned that further gridlock in Washington would “pose ongoing risks to growth.”
The Fed chief noted that the depressed housing sector has delayed a full recovery in the broader economy. He said the home market should gradually return to health – a process he said the government should support.
In his speech in Jackson Hole a year ago, Bernanke signaled that the Fed would begin a new round of Treasury bond purchases to try to lower long-term interest rates, spur spending and boost the stock market. His words ignited a 28 percent, eight-month rally in the Dow.
This time, Bernanke merely repeated that the Fed “has a range of tools that could be used to provide additional monetary stimulus.”