Federal Reserve Chairman Ben Bernanke on Friday said the U.S. economy faced "daunting" challenges and that progress reducing unemployment had been too slow, but he stopped short of providing a clear signal of further monetary policy easing.
Bernanke said the central bank would act as needed to strengthen the recovery but he also said it had to weigh the costs as well as the benefits of more monetary stimulus, although he hinted the costs may be worthwhile.
"As we assess the benefits and costs of alternative policy approaches ... we must not lose sight of the daunting economic challenges that confront our nation," Bernanke said at the Kansas City Fed's annual Jackson Hole symposium.
"Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability."
That was a somewhat weaker hint of policy easing than the minutes of the Fed's last policy meeting had delivered, but it was enough to keep alive hopes in financial markets that the U.S. central bank would soon launch another round of bond purchases to push borrowing costs lower.
The lack of a clear signal of policy action led markets to see-saw in the wake of Bernanke's comments, but in the end his emphasis on the travails of the struggling U.S. labor market helped U.S. stocks extend gains. Yields on U.S. government bonds dropped and the U.S. dollar declined against the euro.
Read more: http://www.reuters.com/article/2012/08/31/us-usa-fed-idUSBRE87T1HT20120831
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