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3:04pm

Fri August 31, 2012
Economy

Bernanke Supports Stimulus But Stays Quiet On Plans

Originally published on Fri August 31, 2012 5:39 pm

Transcript

MELISSA BLOCK, HOST:

It's ALL THINGS CONSIDERED from NPR News. I'm Melissa Block. Federal Reserve Chairman Ben Bernanke made it about as clear as he could today he favors additional steps to stimulate the economy. But he stopped short of saying when the Fed might take action. Bernanke spoke at an economic conference in Jackson Hole, Wyoming. And as NPR's Jim Zarroli reports, he spent much of his time defending the steps the Fed has already taken to address the weak economy.

JIM ZARROLI, BYLINE: Ben Bernanke has come under fire from all sides over the way the Fed has handled the economic downturn. Some say the Fed hasn't done enough to stimulate growth. Some, especially on the right, say he's gone too far. And the criticism has intensified during the presidential campaign. Republican nominee Mitt Romney has even said he wouldn't reappoint Bernanke if elected. So, Bernanke's remarks today had a defensive tone. He spelled out all that the Fed has done to stabilize economy. It cut interest rates to record lows. And when growth stayed flat, he said, it embarked on asset purchases as a way of pumping money into the economy. Former Fed economist Joseph Gagnon.

JOSEPH GAGNON: The things they're doing have never been done before. And there is a risk that it could have been very costly, damaging to the economy.

ZARROLI: In fact, Bernanke claimed Fed policies may have helped create as many as two million jobs. And he seemed to signal that he was ready to do even more. He said the stagnation of the labor market is a grave concern because of the enormous suffering but also because long-term unemployment can wreak structural damage on the economy. Randall Kroszner is a former Fed board member.

RANDALL KROSZNER: This is a response to the naysayers who say that the Fed's out of bullets. He's saying we definitely have bullets left and he may have also said we're locked and loaded.

ZARROLI: One of the steps the Fed could take would be to signal that it will keep long-term interest rates low until 2015 or later. That might encourage companies to borrow and invest more. The Fed could also step up its program of long-term bond purchases, known as quantitative easing. That would be enormously controversial. Republicans, such as Tennessee Senator Bob Porker, have warned that such a move would lead to higher inflation. It's a warning that has been made many times over the past four years. But Bernanke pointed out in his remarks that inflation remains low. And he said the Fed can reverse course if inflation becomes a problem. Ward McCarthy is chief economist at Jeffries and Company.

WARD MCCARTHY: I think he's also laying the groundwork for what they are going to do in the future. And, yes, in the process as well, preparing themselves and others for the criticism that is likely to follow.

ZARROLI: The Fed could take action as early as its September meeting. And stock prices finished the day higher. But Randall Kroszner, who teaches at the University of Chicago, says he doesn't think Bernanke is quite ready to act.

KROSZNER: I think the chairman is willing to move but he wants to see a little bit more data before he makes a decision.

ZARROLI: That data will come next week when the Labor Department releases its August jobs report. Job growth has picked up a bit this summer but it's anything but strong. Then, too, the debt crisis in Europe drags on, and Bernanke made clear today he's worried about the impact it could have on the United States. And he said the Fed must be ready to act if the economy shows more signs of weakness. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright National Public Radio.