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Bernanke: 'It is important to achieve further progress'

By Catholic Online (NEWS CONSORTIUM)
September 2nd, 2012
Catholic Online (www.catholic.org)

Federal Reserve Chairman Ben Bernanke, in his address at the Fed Conference in Jackson Hole, Wyoming left little question that he's going to do more to lift the national economy in the following policy meeting next month. Bernanke, however, didn't mince words when he spoke of the hard road that lies ahead for the U.S. economy.

LOS ANGELES, CA (Catholic Online) - Expressing concern over the labor market, he described high unemployment as a "grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for years." Bernanke added that "it is important to achieve further progress, particularly in the labor market."

Economic recovery is going at far too slow a pace for Bernanke, who called it "far from satisfactory," citing concerns about the jobs market's weak growth.

While there has been better economic data of late, Bernanke was adamant that he is still deeply dissatisfied with the outlook.

The slow job market, he said is the result of cyclical problems in the economy, such as a lack of demand -- and not structural ones, such as a mismatch between the skills people have and the skills employers are looking for.

He says the Fed thinks it can help on cyclical problems, but not structural ones. Bernanke feels that the current situation is something that the Fed can assist.

Bernanke offered a "no panacea" caveat. While he would love fiscal policy makers to take actions to support the economy and address long-run deficits, he doesn't seem to see that as justification for inaction on his front.

The Fed is currently working under a dual mandate imposed by Congress to achieve price stability and maximum sustainable employment. Bernanke played down inflation risks, saying inflation has remained near two percent, "despite repeated warnings that excessive policy accommodation would ignite inflation."

The current situation, where inflation remains stable while unemployment stays unsatisfactorily high, Bernanke in effect laid out his legal argument for pressing harder on the monetary gas pedal.

In response, the Dow Jones Industrial Average initially tumbled 70 points. The dollar also shot up against its rivals, in a sign that investors saw lower odds of more quantitative easing.

"First, there was nothing in there that said they were going to start QE immediately," Keith Bliss, senior vice president at Cuttone & Co. says.

"And then he said that monetary policy cannot fix fiscal policy. We all knew that, but for him to say that we're going to have an overhang in this country no matter what I do, that he's not a panacea -- people thought, 'Maybe it is bad.'"

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