Fed Chairman Ben Bernanke said on Friday that additional monetary stimulus may be warranted because inflation is too low and unemployment is too high, currently at 1.4 percent and 9.6 percent, respectively.
“There would appear — all else being equal — to be a case for further action,” Bernanke said at a conference sponsored by the Boston Federal Reserve Bank. “At current rates of inflation, the constraint imposed by the zero lower bound on nominal interest rates is too high [and the] risk of deflation is higher than desirable,” Bernanke said. “High unemployment is currently forecast to persist for some time.”
Mr. Bernanke also said the central bank could expand asset purchases or change the language in its statement, but offered no details on the Fed’s next step or how it will act at its Nov. 2-3 meeting. However, the Federal Reserve chief pointed out that the Central Bank needs to proceed cautiously.
“Nonconventional policies have costs and limitations that must be taken into account in judging whether and how aggressively they should be used,” Bernanke said.
According to Reuters, most economists expect around $500 billion in easing before the end of current fiscal year.
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