No Big Rescue Plans From Fed Chief Bernanke
RENEE MONTAGNE, host:
This is MORNING EDITION from NPR News. I'm Renee Montagne.
DAVID GREENE, host:
And I'm David Greene.
Nervous investors - and these days that's most investors - were all ears this morning as Federal Reserve Chairman Ben Bernanke delivered a speech in Wyoming. The investors were listening for any clues about additional steps the Fed might take to shore up the sagging economy. Bernanke did not outline any big rescue plans, but he did say the Fed has tools it can use if necessary.
NPR's Scott Horsley joins us now from Jackson Hole, Wyoming. Hello, Scott.
SCOTT HORSLEY: Good to be with you, David.
GREENE: So investors were waiting for this breathlessly. Why all the build-up?
HORSLEY: Well, precisely because the economy has been in such a slump, David. You know, growth in jobs has slowed dramatically since the beginning of the year. We've seen signs that factories are losing steam. Just this morning, the Commerce Department came out with a revision of its economic growth numbers for the second quarter, showing that the economy grew at just 1 percent, barely above stall speed. And so there's a lot of interest in what the Fed or anybody can do to try to come to the rescue.
GREENE: And I gather Bernanke did not have as much to say as some investors would have liked. Tell us what he included in the speech.
HORSLEY: Well, there was very little specific in terms of what the Fed is prepared to do. There was no grand new silver bullet unveiled, nothing for investors to really grab onto as a strong dose of economic medicine. But as you say, Bernanke did, again, reiterate that the Fed has tools in its toolkit that it has prepared to employ as appropriate to support a stronger economic recovery.
He also acknowledged that the weakness of the recovery is not just the result of some of the temporary factors that we were talking about this spring - the Japanese tsunami and the disruption in supply chains that caused, or the high oil prices that resulted from the Arab Spring. Bernanke said there are more persistent drags at work on the economy. And so I guess if you want to look for a silver lining, that negative assessment of the problem could indicate a greater willingness in the future for the Fed to take some action. Bernanke said Fed leaders will be looking more closely at this when they meet again next month.
GREENE: But Scott, a year ago, I believe in the very spot, in Jackson Hole, the Fed seemed ready and took some bolder action. If we're talking about persistent drags on the economy now, as you put it, what's changed? Why not take bold actions today?
HORSLEY: Well, you're right. That was one of the reasons there was so much anticipation for this speech, because it was here at Jackson Hole last year that Bernanke laid the groundwork for what became known as QE2, the big aggressive bond-buying program the Fed undertook that did trigger a rally in the stock market. But the Fed has already used its most potent weapon to boost the economy. It's already set short-term interest rates just about zero, and it's now said it's willing to keep them there for a couple of years.
Compared to a year ago, inflation, although still modest, is a little bit more of a concern. And also the Fed is now getting some political criticism from the likes of Texas Governor Rick Perry, who has accused Bernanke of playing politics with the money supply. So there are a number of things that are sort of tying the Central Bank's hands.
GREENE: We're expecting to hear from the White House in the next few weeks. President Obama is expected to spell out his own plan to shore up the economy, especially focusing on jobs. Did Bernanke offer any encouragement for those actions?
HORSLEY: Well, he has. He said today that most of the economic policies that support robust economic growth in the long run are outside the province of the Central Bank, meaning, look, the Fed's done most of what it can. Now it's up to the president and Congress to get their economic act straight. And he said that even as the federal government must deal with its long-term deficits, short-term efforts that boost the economy could be warranted. He pointed to the extraordinarily high level of unemployment - you know, unemployment now over 9 percent for an extended period. And under those circumstances, he said, policies that promote stronger recovery in the short run may also serve longer-term economic objectives.
GREENE: So perhaps opening the door to some action from President Obama.
HORSLEY: Certainly encouraging the other parts of government to do their part.
GREENE: That's NPR's Scott Horsley, who was speaking to us from Jackson Hole, Wyoming. Thanks, Scott.
HORSLEY: Good to be with you, David. Transcript provided by NPR, Copyright National Public Radio.