Officials: Fed May Need To Take New Action
June 7, 2012 by UPI - United Press International, Inc.
WASHINGTON (UPI) — The U.S. economic recovery risks being derailed and the Federal Reserve might have to take action to support growth, Fed officials said.
Fed Chairman Ben Bernanke Thursday added his voice to three other high-ranking Fed officials who have recently suggested a policy change is in order.
Bernanke’s remarks fell under the category of a hint of a possible change.
“More-rapid gains in economic activity will be required to achieve significant further improvement in labor market conditions,” he said in prepared remarks presented to the Joint Economic Committee on Capitol Hill. With optimizing labor opportunities and keeping inflation tame being the two-pronged mission of the Fed, this suggests Bernanke is leaning toward promotion of growth to spur job creation.
Other Fed officials have made more direct suggestions.
“The balance of risks” appears “tilted toward a weaker economy,” Fed Vice Chairwoman Janet Yellen said in Boston Wednesday, pointing to the possibility inflation would drop below the Fed’s 2 percent goal or economic growth would slow.
She said she was convinced the Fed should “provide further policy accommodation,” either with assurances interest rates would stay low or by expanding the central bank’s already sizable holdings of long-term securities.
Yellen’s views are often similar to those held by Bernanke, The Washington Post said.
The presidents of the Federal Reserve Banks of Atlanta and San Francisco separately expressed concerns Wednesday eurozone turmoil could derail the U.S. economic recovery.
“I am giving more weight and higher probability to a negative influence on our economy coming from Europe,” Atlanta Fed President Dennis Lockhart said in a speech in Fort Lauderdale, Fla.
If modest economic growth is no longer a realistic goal, then “further monetary actions to support the recovery will certainly need to be considered,” he said.
San Francisco Fed President John Williams said he was concerned not just about the European sovereign-debt crisis, but also about federal government spending cuts, which he said could hurt the U.S. economy.
“The turmoil in Europe and government fiscal retrenchment in the United States raise the danger that the economy could perform worse than I expect,” Williams said in a speech in Bellevue, Wash.
Fed officials’ next policy-making meeting is to take place June 19-20.
A Fed report released Wednesday ahead of that meeting pointed to concerns businesses will cut back on hiring and investing due to uncertainties about U.S. political and fiscal outlook, as well as the eurozone crisis.
Bernanke pointed out that job growth for the first three months of 2012 came to an average addition of 225,000 jobs per month, a sharp climb from 150,000 per month through the same period of 2011.
But that pace has slowed significantly, he said, to 75,000 per month in April and May.
This may be because seasonal summer hiring took place early this year with unseasonably warm weather earlier than usual in the year. It also may be attributed to “some catch-up in hiring on the part of employers who had pared their workforces aggressively during and just after the recession,” he said.
Released Wednesday, the Fed’s “beige book,” — which comes out eight times a year and is named for the color of its cover — said the U.S. “economic outlooks remain positive.”
The beige book, a compilation of anecdotal reviews of the economy from the 12 regional Federal Reserve districts, said “contacts were slightly more guarded in their optimism.”