Bernanke gives little indication QE3 on the way
Federal Reserve Board Chairman Ben Bernanke gives testimony as he gives a semiannual report to the Senate Banking Committee, Tuesday, July 17, 2012, on Capitol Hill in Washington. / AP Photo/Carolyn Kaster
However, Bernanke's assessment of the economy is bleak. Promising that the Fed will do its job, he sounded concern about the trajectory for fiscal policy and acknowledged the risks from Europe.
All of that points to the Fed leaning toward further economic stimulus. In the question and answer session with lawmakers that followed his formal remarks, Bernanke did say that the Fed is examining its options for further easing should it be needed. That statement is quite different from the internal discussions the Fed was having not long ago about how to remove the easing that was already in place. So all hope is not lost for those looking for the Fed to take action to spur growth. For now, however, Bernanke is holding his cards close to his chest.
What would change that? We don't know what other members of the Fed are thinking, and Bernanke may not be willing to speak for them. It could be that the Fed is already leaning toward more easing even though he has not said so specifically. Some of the communication from other Fed members hints in that direction.
But if the incoming economic data continues to be weak -- most recently, retail sales were down for the third month in a row (but industrial production and capacity utilization are both up, which muddies this signal -- then I expect more easing will be forthcoming at the next FOMC meeting, if not before.
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