Ben Bernanke, chairman of the Federal Reserve, reportedly informed a Congressional oversight panel that the Fed has some space to provide more monetary stimulus that will give the US economy a boost. In a letter to Representative Darrell Issa, chairman of the committee, Bernanke reportedly indicated that there is scope for additional action by the Federal Reserve that may ease the financial conditions while strengthening the economic recovery.
Bernanke will give a speech at an annual conference at Jackson Hole, Wyoming next week. This much-anticipate speech may offer hints of the possibility that the Fed will implement additional bond-buying activities.
Bernanke indicated that it was necessary for policymakers to see what is beyond the short term in response to questions whether it was too early to take into account additional monetary easing steps sine the Operation Twist program of the Fed is still being implemented. The program is intended to reduce the yields of long-term bonds.
He said that since the monetary policy actions move gradually, it was necessary for the policy stance to take into consideration the projected performance of the economy in the future.
Officials at the Fed have dramatically reduced projections for the economic growth in the US for June. It may also be possible for another set of revisions to be implemented following its upcoming meeting in September.
The gross domestic product of the US has increased at 1.5 percent annually for the second quarter, which is considered too weak to support a continuous reduction in unemployment. The unemployment rate has increased to around 8.3 percent last July.
Rates were reduced by the Fed to nearly zero as a means of dealing with the recession and financial crisis that started in 2008. It also purchased around $2.3 trillion worth of mortgage as well as Treasury bonds to push down costs for long-term borrowing.