By TraderVox.com
Tradervox.com (Dublin) – The Federal Reserve Chairman Ben Bernanke defended his monetary easing program in Jackson Hole Wyoming, where he indicated that he would be deploying such action to curb the rising unemployment in the country. In his speech, Bernanke described his actions as beneficial to the country’s economy and ensured that critics of such moves understood that he is aware of the disadvantages of such moves which he said were manageable. The remarks by the Fed Chairman led to an increase in stocks and treasuries as the dollar dropped to almost three-month low.
According to Mark Spindel of Potomac River Capital in Washington, the major point in Bernanke’s speech was that tools available will work and the status of the economy at the moment warrants serious consideration of these tools. After the speech, the Standard and Poor’s 500 Index appreciated by 0.5 percent as the ten-year Treasury note dropped by 0.07 percent. In addition the Dollar Index, used by the International Exchange Inc dropped by 0.55 percent to its lowest level since may 14. Bernanke also highlighted the disadvantages of high unemployment levels in the country, saying that they may cause irreversible damage to the US economy in the long term.
With these remarks, Former Fed Vice Chairman Alan Blinder interpreted Bernanke’s as a signal of stimulus as soon as September. Blinder said in Jackson Hole on Friday that given the fact that Bernanke used a similar forum to signal the second round of quantitative easing, his comments in Jackson Hole indicated that the Fed is likely to make the third round of purchases which might happen as soon as this month. According to Roberto Perli, a managing director responsible for policy research at International Strategy and Investment, indicated that the Fed is very close to making monetary easing and the only question remaining is whether it would happen this month or the fed would wait for a stronger case to be made. The Federal Open Market Committee meets on Sept 12-13 where they are expected to provide a way forward.
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