In testimony before the House Financial Services Committee Wednesday, Fed Chairman Ben Bernanke indicated that the central bank would commit to another round of stimulus if economic growth continues to stall.
The Fed Chief acknowledged that economic numbers from the first half of 2011 were less than impressive. Attributing the dismal 9.2% unemployment rate from the June jobs report to a
“slowdown in aggregate demand… centered in the household sector,” Bernanke concluded that the “willingness of consumers to spend will be an important determinant of the pace of recovery in the oncoming quarters.” Essentially, the pace of the recovery hinges on consumer confidence.
Bernanke made clear that the Fed — as they did in 2008 — has the capacity to pump money into the economy even after the interest rate hits zero. “Even with the federal funds rate close to zero,” he said. “We have a number of ways in which we could act to ease financial conditions further.”
But while Bernanke’s 2012 and 2013 growth and unemployment numbers remained relatively optimistic for a faster recovery, he acknowledged that the slowdown of the first half of this year might have lingering effects.
This all means that if slow growth continues, the Chairman may not hesitate in “deploying additional stimulus if conditions warrant.”
Of course, progressives have been urging Bernanke to use the tools at his disposal for years now in order to boost the employment rate and pace of economic growth (the recent policy known as QE2 was seen as something of a success, but worried investors who are terrified of the prospect of inflation).
If he took a hard stance on boosting employment instead of combating barely-existent inflation, both the Democrats’ electoral prospects–and the job prospects of millions of Americans–would increase markedly. But how badly does Bernanke, a moderate Republican, want this?
Copyright 2011 The National Memo