Ben Bernanke for time to appease the "hawks" of the Fed
Monday, August 30th, 2010On Friday a new conditional easing of U.S. monetary policy to a deterioration in economic conditions in the U.S., the Federal Reserve chairman, Ben Bernanke, has tried to appease the "hawks" who favor the Fed the fight against inflation, in order to rally them to his latest position.
This attitude may make it possible to Ben Bernanke to have the support of the Fed in cases of substantial worsening of the U.S. economic slowdown.
"The statistics should convince the most timid members (of the monetary policy committee of the Fed)," said Julia Coronado, senior economist at BNP Paribas.
When the Fed's annual symposium in Jackson Hole, Wyoming, Bernanke has compiled a table Friday gloomy economic outlook and reiterated the tools available to the central bank to stimulate the recovery.
The statements of the successor to Alan Greenspan, however, were more nuanced than those of the central bank on Aug. 10 after its last meeting, which had resulted in new measures to support the economy and credit.
The main decision that day, namely the resumption of redemptions of government bonds in the long term (Treasuries) without further inflate the stock of the central bank, has been widely discussed within the institution.
Some members of the Monetary Policy Committee considered that this decision would give the market the impression that the Fed was closer to a new monetary easing significant than it actually was.
ASSESSING THE RISKS OF A NEW FLEXIBILITY
Leaders of the Federal Reserve also wonder if the recent weakening of the U.S. economy is not just a slump before further acceleration of growth, instead of viewing it as a warning about the ability of growth support job creation.
Purchases of "Treasuries and have sent the wrong signal to the markets, while some criticized the swelling of the institution's balance sheet, increased by more than half since the beginning of the financial crisis in late 2008, to 2,300 billion (1,809 billion euros).
The statements by Ben Bernanke Friday were therefore able to reassure some of the skeptics.
While acknowledging the slowdown in the economy, the Fed chairman said that the conditions for a recovery in growth next year seemed satisfied.
"The president did not prepare the country to a recession" double dip ", stated Dana Saporta, Credit Suisse.
Ben Bernanke also acknowledged that it was difficult to assess the real impact of increased purchases of Treasuries and a lowering of interest rates, already extremely low, which the Fed pays banks for their cash have limited effects.
He also explained that one of the factors on which the Fed will base future decisions would be a further slowdown in inflation, already low, which increases the risks of deflation.
For some economists, the pace of recovery has slowed U.S. and statements from Ben Bernanke augur further action by the Fed in the months ahead.
"The general tone was to 'wait and see', despite showing signs of being not only that economic activity in the United States has returned below its potential growth but also to risk a further slowdown," wrote January Hatzius, an economist at Goldman Sachs in a note.
In outlining the conditions under which the Fed could decide new measures to prevent a relapse into recession, Ben Bernanke has probably facilitated the meeting a consensus around him on the FOMC.