WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said on Wednesday the central bank to ease IS ready Monetary Policy Weaken Further if the economy and inflation moves lower, hinting Policymakers Were Actively mulling Further stimulus.
While holding to view a Recent Economic softness That Would Eventually pass, ET Appeared less confident in That projection - and more Willing to entertain the Possibility of Another round of stimulus.
"The Possibility That Remains the Recent Economic Weakness May PROVE more persistent than expected and deflationary Risks That Might reemerge, implying a Need for Additional policy support," Bernanke Told the House of Representatives Financial Services Committee.
Noted specifically Bernanke Fed forecasts for June, Which Were Already Significantly revised down from April, Had not Incorporated recent data, particularly last Friday's dismal Employment Report.It Showed job growth ground to a halt Essentially in May and June, while jobless rate rose to 9.2 percent.
U.S. stocks, Which Have taken a drubbing over the last week on worries about Europe's debt problems and we Concerns about the U.S. economic outlook, rallied 1.2 percent, while Treasury Bond Prices and the dollar tumbled.
"The Federal Reserve Remains Prepared to Respond Economic Developments Should Indicate That year Adjustment in the stance of monetary policy Would Be Appropriate," Bernanke said.
Pressed on the budget DURING the question-and-answer session, Bernanke reiterated warning That history has the U.S. failure to raisedebt ceiling deal a severe blow Would to the Global Economic Recovery.
Minutes from the Fed's June meeting, released on Tuesday, Showed Some Policymakers Should Believe the Fed stand ready to Provide more support to the economy if the recovery flags, rekindling the Threat of a debilitating Downward Spiral in Price and wages payday loan lenders.
Others on the policy-setting Federal Open Market Committee, however, felt Inflation Risks Might force the central bank to Withdraw stimulus Sooner Than Anticipated Currently IS.
DOOR OPEN TO QE3
Still, Given the change in tune, Some Were investors betting the more dovish members of the committee Would win the day in pushing for a Third round of quantitative easing if the economy continued to deteriorate.
"My initial reaction was 'EQ3 here we come'," Said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.Gross domestic product expanded just 1.9 percent in the first months of the Year Three, and the second quarter to look Does not Have Been Much Better.
Bernanke Held to view the recent Weakness That WAS due to temporary factors by hand in like high energy effects on the Costs and Global Industry from Japan's earthquake and tsunami.
Purpose ET Acknowledged the Labor Market Remains Weaker Than Would like the Fed.
"The most recent data attest to the Continuing Weakness of the Labor Market," Bernanke said.
Bernanke Defended the second round of bond buys Against Critics Who Said It Had Been ineffective.
He Said the Fed Estimates round two of quantitative easing, or QE2, Lowered long-term interest rates by Between 0.1 and 0.3 per centage point, Which Would Be Said Bernanke Roughly equivalent to a 0.40 to 1.20 per centage point decline in the federal funds rate, Which Currently IS set in a range Between zero and 0.25 percent.
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