January 20, 2020

Fed Stimulus Still Needed to Help Recovery, Bernanke Says

While acknowledging the risks of historically low interest rates and the Fed’s aggressive policy of buying government bonds to help stimulate the economy, Mr. Bernanke said in testimony that “a premature tightening of monetary policy could lead interest rates to rise temporarily but also would carry a substantial risk of slowing or ending the economic recovery.”

After his opening statement, however, Mr. Bernanke seemingly opened the door a bit wider to tapering down.

Under questioning by Representative Kevin Brady, a Texas Republican who chairs the Joint Economic Committee, Mr. Bernanke said the Fed could prepare to “take a step down” in the next few meetings if the outlook for the labor market improved.

“It’s dependent on the data,” he said. “If the outlook for the labor market improves, we would respond to that.”

Mr. Brady asked if the tapering could begin before Labor Day, prompting Mr. Bernanke to say, “I don’t know.”

“We are buying a certain amount of assets each month,” he continued. “We are looking for increased confidence and in steps respond to that.”

In his opening statement, Mr. Bernanke said that since last summer, “financial conditions in the euro area have improved somewhat,” helping lessen the headwinds faced by the American economy as well.

He noted that the federal government’s fiscal policy had become “significantly more restrictive,” even as the Fed had pursued a looser monetary policy. The expiration of the payroll tax reduction in January and tax increases, as well as automatic spending cuts imposed by Congress and lower military spending, will collectively “exert a substantial drag on the economy this year.”

Speculation had been rising in recent weeks that the Fed might be preparing to taper its bond purchases, which total $85 billion a month. The bond-buying program has been credited with increasing growth, but some observers worry it could create a bubble in the prices of assets like stocks.

At its most recent meeting this month, the Fed said it was “prepared to increase or reduce the pace of its asset purchases,” prompting some analysts to speculate that bond purchases might be reduced in the coming months.

“In considering whether a recalibration of the pace of its purchases is warranted,” Mr. Bernanke told the Joint Economic Committee, the Fed “will continue to assess the degree of progress made toward its objectives in light of incoming information.”

Stocks on Wall Street surged after Mr. Bernanke’s remarks but pulled back in afternoon trading.

This article has been revised to reflect the following correction:

Correction: May 22, 2013

An earlier version of this article incorrectly described the timing given by Mr. Bernanke of a potential Fed move. He said the Fed could prepare to “take a step down” in the next few meetings, not the next few weeks.

This article has been revised to reflect the following correction:

Correction: May 22, 2013

Article source: http://www.nytimes.com/2013/05/23/business/economy/bernanke-fed-stimulus-still-needed-to-help-recovery.html?partner=rss&emc=rss

LOOKING AHEAD: Economic Reports for the Week of Dec. 3

ECONOMIC REPORTS Data will include ISM manufacturing index for November and construction spending for October (Monday), ADP employment for November; revised third-quarter productivity, ISM service index for November and factory orders for October (Wednesday), weekly jobless claims (Thursday) and unemployment for November, Thomson Reuters/University of Michigan consumer sentiment index for December and consumer credit for October (Friday).

CORPORATE EARNINGS Companies scheduled to report include Toll Brothers and Pandora Media (Tuesday) and Smithfield Foods (Thursday).

IN THE UNITED STATES On Monday, automakers will report their North American sales for November; and the Financial Stability Oversight Council will meet in a closed session in Washington.

On Tuesday, John Stumpf, the chief executive of Wells Fargo; Brian Moynihan, the chief executive of Bank of America; and Kenneth Chenault, the chief executive of American Express, will speak at the Goldman Sachs Financial Services Conference at the Conrad Hotel in New York; and the Federal Deposit Insurance Corporation will release its quarterly banking profile on industry earnings.

On Wednesday, a House Financial Services subcommittee will conduct a hearing about the economic and market implications of provisions in the Dodd-Frank overhaul law on derivatives; and the Department of Energy will release its annual forecast for energy supply, demand and prices to 2040.

On Thursday, the Census Bureau will release the third of three broad surveys about 2007-11 data on income, education, occupation and other features; a federal judge will hear Apple’s arguments for permanently barring United States sales of eight Samsung smartphone models; the Joint Economic Committee will conduct a hearing about the effect of the so-called fiscal cliff on the economy and the middle class; the House Transportation Committee will conduct a hearing on the high-speed and intercity passenger rail program; the Senate Banking Committee will conduct a hearing about oversight of the Federal Housing Administration; a Senate Commerce subcommittee will conduct a hearing about the effect of Hurricane Sandy on the nation’s transportation systems; and Edward DeMarco, acting director of the Federal Housing Finance Agency, will speak at the Securities Industry and Financial Markets Association’s securitization outlook conference in New York.

On Friday, American Airlines’ pilots will conclude voting on their contract.

OVERSEAS On Monday, euro zone finance ministers will meet in Brussels to discuss the fiscal troubles of Greece, Spain and Cyprus; and the United Nations World Conference on International Telecommunications will start in Dubai and run through Dec. 14. Representatives from 193 United Nations member states will develop new international rules and guidelines.

On Tuesday, European Union finance ministers will meet in Brussels to discuss banking oversight.

On Wednesday, the United States Embassy in Beijing will bring together Chinese investors to discuss investment opportunities with officials from American states; and George Osborne, the chancellor of the Exchequer in Britain, will present updates of economic and fiscal forecasts.

On Thursday, the European Central Bank and the Bank of England will issue decisions about interest rates.

Article source: http://www.nytimes.com/2012/12/03/business/economy/economic-reports-for-the-week-of-dec-3.html?partner=rss&emc=rss