Bernanke May Try Spurring Economy by Prolonging Stimulus (1)
Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Joshua Zumbrun and Steve Matthews
June 21 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke will probably delay the central bank’s exit from record stimulus, economists said in a survey, giving the flagging economy a boost without resorting to additional asset purchases.
Seventy-nine percent of 58 economists expect Bernanke to sustain the Fed balance sheet at current levels until October or later, compared with 52 percent who held that view before the Fed’s last policy meeting in April, according to a Bloomberg News survey conducted last week. Ninety percent of those surveyed predict the Fed will wait until the fourth quarter before dropping its pledge to hold interest rates low for an “extended period.”
Bernanke and his fellow policy makers have given no indication they’ll tighten policy anytime soon. With manufacturing slowing and unemployment increasing during May to 9.1 percent, the Fed chief said this month growth is “frustratingly slow,” and Richmond Fed President Jeffrey Lacker said the economy could be “stuck below trend for some time.”
“The longer they signal they will be on hold for an extended period, they are de facto easing,” said Carl Riccadonna, senior U.S. economist at Deutsche Bank Securities Inc. in New York. Expectations the central bank will delay a policy reversal help reduce long-term interest rates and spur growth, he said.
Congressional Mandate
The Federal Open Market Committee will begin a two-day meeting today in Washington and issue a statement tomorrow at about 12:30 p.m. Bernanke is scheduled to meet the press at 2:15 p.m. tomorrow, and the central bank will also release economic projections by policy makers.
By prompting expectations it will postpone a reduction in stimulus, the Fed can draw closer to meeting its congressional mandate to achieve maximum employment, Fed Vice Chairman Janet Yellen said in February.
“Such a shift in policy expectations would be associated with a lower trajectory for the unemployment rate,” Yellen said in a speech in New York. “Financial conditions would become significantly more accommodative, even in the absence of any change in the current level of the funds rate.”
AI
