Federal Reserve Chairman Ben Bernanke used this years Economic Symposium to challenge Fed policymakers to \u201cmake the difficult choices that are necessary to put the country\u2019s fiscal house in order\u201d. Bernanke also repeated last year\u2019s message that despite record low interest rates and yields on Treasuries, the Fed still has policy tools at its disposal to stimulate the economy.<\/p>\n
Unlike last year\u2019s gathering however, Bernanke did not make any specific announcement on the timing of any actions the Fed may have in mind. The only commitment from Bernanke is to say that September\u2019s policy meeting would be extended by a day to allow a \u201cfuller discussion\u201d of the state of the economy.<\/p>\n
QEIII On Hold?<\/strong><\/p>\n In the days leading up to the symposium there was much conjecture on the possibility that the Fed would announce another round of quantitative easing. Bernanke made no mention of kicking off a third program of bond buying to inject more liquidity into the banking system but this option likely remains a matter to be discussed at next month\u2019s meeting.<\/p>\n Investors were no doubt disappointed that today\u2019s address offered no official confirmation of further spending. As a result, markets responded negatively in the aftermath of Bernanke\u2019s comments but by mid-afternoon both the Dow and the Nasdaq were back in positive territory.<\/p>\n Bernanke Challenges Policymakers<\/strong><\/p>\n In a surprising move, Bernanke directed a considerable part of his speech to the nation\u2019s policymakers including a strong indictment of how Congress dealt with the recent credit ceiling debate.<\/p>\n In what can only be described as a rebuke to Congress, Bernanke urged federal legislators to take the problems facing the economy more seriously. Bernanke practically implored lawmakers to set aside the politics and to act now \u201cto put in place a credible plan for reducing future deficits over the longer term\u201d.<\/p>\n \u201cThe negotiations that took place over the summer disrupted financial markets and probably the economy as well,\u201d declared Bernanke. \u201cSimilar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses.\u201d<\/p>\n This is certainly the strongest language to date for the Fed Chairman and may possibly underscore a growing sense of desperation at the Federal Reserve. It is fine for Bernanke to tout the Fed\u2019s policy tools but these have been tried with limited success. Bernanke now appears to be handing the ball to the fiscal policymakers.<\/p>\n Scott Boyd<\/a> is a regular contributor for the OANDA MarketPulse FX blog<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" Federal Reserve Chairman Ben Bernanke used this years Economic Symposium to challenge Fed policymakers to \u201cmake the difficult choices that are necessary to put the country\u2019s fiscal house in order\u201d. Bernanke also repeated last year\u2019s message that despite record low interest rates and yields on Treasuries, the Fed still has policy tools at its disposal … <\/p>\n