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Not wanting to be alarmist, Ben Bernanke chose his words very carefully in this morning's speech from Jackson Hole, Wyo. He didn't announce, or even discuss, any new policy options, other than to debunk the notion that the Fed would try to engineer inflation.
Yes, they'll buy more securities if conditions warrant, but we already knew that. The Federal Open Market Committee could put an explicit time frame on how long they'll keep interest rates exceptionally low, or they could reduce the rate paid on excess reserves, neither of which is a new concept.
Regarding the economy, Bernanke said the economic pace is "somewhat less vigorous than we expected," but "preconditions for a pick up in growth in 2011 appear to remain in place."
Deflation is "not a significant risk" at this time, according to the Fed Chairman.
All in all, this is a very uneventful speech at a time when nerves are on edge, no doubt a deliberate attempt by Bernanke to impart some confidence and not spark further volatility in the bond and stock markets.
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Hoenig should replace Bernanke ASAP. That's the only thing
that will help the economy, unless the FED wants the govt. to
nationalize everything and double or triple the deficit. The
balance between thousands of bank employees in banks that can't go under and millions of people trying to live on 0% interest is never addressed sensibly by Bernanke. You cannot reduce unemployment without corporate earnings, you cannot pay off a mortgage at any interest rate without employment, and you cannot generate corporate earnings with 0% interest for the consumer to spend. Bernanke only smiles when big banks make billions, and economic improvement can't be improved by big banks making billions. They are diligently working hard on the wrong thing to improve the economy.
Bernake is just kicking the can down the road. With the consumer being 70 per cent of the economy-they have no jobs or are under employed. They have no money to spend and won't for a long time.