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Sunday, July 3, 2011

Bernanke Leaves Door Open to Further Easing

By Scott Lanman and Jeannine Aversa

Federal Reserve Chairman Ben S. Bernanke left the door open to a fresh shot of monetary stimulus should the economic rebound he?s predicting fail to materialize.

The Fed would be ?prepared to take additional action, obviously, if conditions warranted,? including the purchase of more Treasury securities, Bernanke said yesterday after U.S. central bankers met in Washington. The economy will probably overcome constraints from elevated energy prices and Japan- related disruptions to manufacturing, he said. Still, declining home prices, high unemployment and weaknesses in the financial system may restrain the recovery in the longer term, he said. [...]

?Bernanke?s remarks kept that door open? to more bond buying, said former Fed Governor Lyle Gramley, currently senior economic adviser at Potomac Research Group in Washington. ?The hurdle for QE3 is obviously high. But if large downside risks materialize and the economy slows enough so that the unemployment rate starts to increase again, QE3 would have to be considered.?

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