With the Fed’s policymakers taking no new action at their meeting last week, Bernanke is staying cautious for the time being, reserving the central bank’s more powerful weapons in case the recovery stalls. Some economists say this is the right policy for a recovery that seems to be gaining stream. But, if the unemployment rate, which stands at 8.3 percent, does not continue to decline at a fast pace, critics say Bernanke’s legacy could be impugned.
“If we end up with a few more years of unemployment in the eights, which is not out of the question, people are going to say Bernanke did a good job at the heart of the crisis but dropped the ball when people were still suffering,” said Christina Romer, an economics professor at the University of California-Berkeley and former chief economist to President Obama.
Bernanke, who’s expected to step down at the end of his term in early 2014, has won praise from economists for his response to the financial crisis and recession. He stretched the authorities of the Fed to keep markets stable and pumped trillions of dollars into the economy through bond purchases to spur lending and hiring.
He must now decide what steps the Fed should take to influence the economy at a time when it is showing new signs of vigor but also facing threats, such as from Europe’s financial crisis. Bernanke has shunned dramatic measures he once advocated as a scholar, when he insisted that central banks have the responsibility to take steps to boost growth if it is lacking.
“If the Bernanke of 2000 listened to a news conference of the Bernanke of today, the old Bernanke would say the new Bernanke is not doing everything he can,” said Laurence Ball, an economist at Johns Hopkins University who has written a paper on Bernanke’s shift.
Still, many economists say that Bernanke has a host of good reasons not to push the Fed to do more than it is already doing, which includes announcing that the Fed is unlikely to raise interest rates from their ultra-low levels no sooner than late 2014. The U.S. economy is facing different — and less severe — challenges than during the financial crisis and its immediate aftermath.
“I’d say his performance up to now has been exemplary,” said Stuart Hoffman, chief economist at PNC Bank. “I’d say history will judge him as the right man for the right time to do what he needed to do.”
Hoffman noted that Bernanke can always reverse course and take new action if needed. “If the economy slows down and his group does something, that would add to the legend,” he said.