Essence of Ben Bernanke Michigan Speech: QE is safe

Commodity Online
Investors may breathe easy now!

The QE measures are safe for now; at least that is what we gather from Ben Bernanke speech’s real time update from Business Insider.

Labour markets

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While the US Federal Reserve will look at the impact on financial markets regarding monetary policies, it would also keep an eye on whether the labour market situation has improved.

Even as the Fed sees modest improvement in labour markets it is still looking for ‘a stronger labor market, with broader improvement.’ he beamed to the gathering at US Michigan University.

The pace of growth in labour markets has not been as strong as one would normally think which is required to get improvements in the said markets. However the unemployment rates have fallen to 7.8% from a 10%.

‘High unemployment motivates and justifies the Fed’s current monetary policies.’ he said.

Inflation

The inflation rate is ‘very low’ and may be on track to remain below 2%. He said Fed policies are not evidenced to have created inflation. But he acknowledged that financial stability risks arising from Fed policies are “a difficult issue.”

But proper supervision of Banks can help address the issues. He wants the Fed actions to be justified in a “cost-benefit” framework.

Interest rates

He also said that ‘hiking interest rates would add to budget deficits, aggravating fiscal problems: ‘raising rates wouldn’t be sensible action to get Congress going on budget negotiations’ he said.

Making the monetary policy too tight may not also be helpful, a lesson from Great Depression.

The Euro crisis has also contributed to global slowdown even as Chinese slowdown is a policy goal aimed at rebalancing the Chinese economy, he noted.

Source


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