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
But if the incoming economic data continues to be weak -- most recently, 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.for the third month in a row (but