On Friday, Federal Reserve Chairman Ben Bernanke will deliver a speech at an economic conference in Jackson Hole, Wyo. Investors will closely watch Bernanke’s remarks for any signs that the central bank will do something to help the economy. Zachary A. Goldfarb reports :
With his speech sandwiched between the national political conventions, there is more political pressure on Bernanke than perhaps ever before.
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Republicans are insisting that he refrain from doing anything more to try to pump up economic growth. Democrats, who tend to be more reserved on the matter, are demanding that he take new action.
The truth, Bernanke has said repeatedly, is that the Fed’s ability to change the direction of the economy is limited, and it’s not clear the benefits of new measures outweigh the potential costs.
Economists say new Fed actions are likely to have only a small effect on job creation. Bernanke doesn’t have control over the two biggest factors affecting economic growth: how Congress and the president handle the government’s spending and taxation choices, and how Europe’s leaders respond to their continent’s crisis.
Yet global investors are looking to him — and not the two men addressing millions of people this week and next as they campaign for president — for a sign the U.S. government will do something to keep the U.S. economy, and by extension the global one, healthy.
Some economists, however, doubt the Fed chief will signal any action to buy more bonds, The Associated Press reports :
Investors are hoping Chairman Ben Bernanke will at least hint Friday that the Federal Reserve is ready to launch another round of bond purchases to try to lower long-term U.S. interest rates and spur more borrowing and spending.
He’s unlikely to deliver.
Economists who monitor the Fed doubt Bernanke will say anything dramatic when he speaks at an annual economic conference in Jackson Hole, Wyo. Many think a slightly brighter economic outlook has lessened the urgency for the Fed to act soon.
“I don’t expect him to give some significant clue as to what the Fed’s next move is,” says economist Timothy Duy at the University of Oregon.
At the end of every August, economists and central bankers convene in the Rocky Mountains at a symposium organized by the Federal Reserve Bank of Kansas City. They present papers and argue about economic issues. But mostly, they wait to see what the Fed chairman has to say.
Traders especially will be following what the Federal Reserve chairman has to say Friday. Right now, the dollar has been trading in tight ranges, The Associated Press reports:
Traders will be watching to see whether he hints that the central bank will take additional steps to help the U.S. economy.
Last week, minutes from the Federal Reserve’s last policy meeting appeared to show it was leaning toward more help for the U.S. economy.
The euro fell to $1.2502 in afternoon trading from $1.2528 late Wednesday. The British pound fell to $1.5790 from $1.5836.
The dollar fell to 78.56 Japanese yen from 78.70 yen and to 0.9603 Swiss franc from 0.9587 Swiss franc.
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