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Fed Chairman Ben S. Bernanke doesn't tip hand on more stimulus

Federal Reserve Chairman Ben S. Bernanke at the Economic Club of Minnesota

Federal Reserve Chairman Ben S. Bernanke, in a speech to the Economic Club of Minnesota on Thursday, repeated his message from Jackson Hole, Wyo., two weeks ago: The United States' long-term economic prospects remain good if the country’s leaders take the necessary steps to achieve that outcome.

"And I stress if," Bernanke reiterated in remarks that seemed to anticipate President Obama’s scheduled speech later Thursday that will outline his new jobs-creation plan.

But the Fed chairman didn’t repeat his criticisms from two weeks ago at at the Kansas City Federal Reserve Bank’s annual Jackson Hole conference, where he essentially blamed Washington policymakers for causing upheaval in financial markets and failing to do their part in bolstering the flagging recovery. 

Nor did Bernanke offer any new insights about what’s likely to come from the next central bank policy meeting Sept. 20-21. The bad jobs report last Friday has raised odds that the Fed will take some new measure to further loosen monetary policy in an effort to stimulate lending. Many are betting the Fed will shift its assets and buy more long-term bonds in a bid to further lower rates on mortgages and other longer-term loans.

But Bernanke faces dissent from some of his colleagues who have made it clear that they fear additional monetary stimulus will do more harm than good. Three members voted against the Fed’s statement in August in which it pledged to keep short-term interest rates at near zero for at least another two years.

When asked about the internal division after his speech Thursday, Bernanke joked that when two members agree one is being redundant. And he sought to dispel concerns that the division in the committee might stand in the way of any needed policy actions. 

“It’s natural to have some disagreement,” he said, noting that the Fed’s current predicament was in many ways unprecedented, with the economic recovery showing unusual weakness and the Fed already having used its traditional policy tools.

Bernanke said he welcomed the debate and discussion, insisting that the difference in views was “ultimately constructive.” As chairman, Bernanke from the start has sought to maintain a collegial climate and find a middle ground. It remains to be seen how long that will last.

In a light moment that ended a short question-and-answer session, Bernanke declined to offer a review of actor Paul Giamatti's portrayal of him in the HBO docudrama "Too Big To Fail," about the 2008 financial crisis.

"I didn’t see that movie," Bernanke deadpanned. "I saw the original."

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Divided Fed to keep interest rates low for two years

-- Don Lee and Jim Puzzanghera

Photo: Federal Reserve Chairman Ben S. Bernanke at the Economic Club of Minnesota. Credit: Associated Press

 
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