Bernanke Keeps the Easy Money Coming

Fed chairman shocks experts with decision to leave economic-stimulus programs untouched.

Chairman of the Federal Reserve Ben Bernanke testifies before the House Financial Services Committee on Capitol Hill in Washington, Wednesday, July 17, 2013. 
National Journal
Patrick Reis
See more stories about...
Patrick Reis
Sept. 18, 2013, 10:41 a.m.

The Fed­er­al Re­serve is still go­ing all-in on its ef­forts to stim­u­late the U.S. eco­nomy, Chair­man Ben Bernanke an­nounced Wed­nes­day, sur­pris­ing ex­perts who had pre­dicted the Fed would taper its stim­u­lus ef­forts.

In­stead, the Fed will con­tin­ue its $85-bil­lion monthly bond buys — a mon­et­ary-policy tech­nique known as “quant­it­at­ive eas­ing” — that are in­ten­ded to lower in­terest rates, sup­port the hous­ing mar­ket, and stim­u­late eco­nom­ic growth.

The Fed’s mon­et­ary-policy com­mit­tee has been say­ing for months it will be­gin scal­ing back the bond buys when it is con­fid­ent in the strength of the U.S. eco­nomy, and many pre­dicted that the pan­el would make that de­cision fol­low­ing the two-day meet­ing that ended Wed­nes­day.

But in a state­ment fol­low­ing the meet­ing, the com­mit­tee said it pre­ferred to take a wait-and-see ap­proach with eco­nom­ic growth.

“The Com­mit­tee sees the im­prove­ment in eco­nom­ic activ­ity and labor mar­ket con­di­tions since it began its as­set pur­chase pro­gram a year ago as con­sist­ent with grow­ing un­der­ly­ing strength in the broad­er eco­nomy,” the com­mit­tee said in a state­ment fol­low­ing the meet­ing. “However, the Com­mit­tee de­cided to await more evid­ence that pro­gress will be sus­tained be­fore ad­just­ing the pace of its pur­chases.”

The Fed will also con­tin­ue the oth­er pil­lar of its stim­u­lus plan: keep­ing the fed­er­al funds rate low for banks, an­oth­er policy aimed at keep­ing money cir­cu­lat­ing throughout the eco­nomy.

Since the fin­an­cial crisis, Bernanke’s Fed has gone to great lengths to at­tempt to stim­u­late the eco­nomy, and the chair­man has faced great cri­ti­cism for it. Con­gres­sion­al Re­pub­lic­ans have pil­lor­ied Bernanke — who was first ap­poin­ted by former Pres­id­ent George W. Bush — over the stim­u­lus ef­forts, say­ing they have left the eco­nomy at risk for fu­ture in­fla­tion.

Thus far, in­fla­tion re­mains well be­low the bank’s tar­get rate of 2 per­cent, and the com­mit­tee Wed­nes­day said it did not ex­pect in­fla­tion to rise sharply in the fu­ture. Ac­cord­ing to a set of eco­nom­ic fore­casts re­leased along­side the policy state­ment, the Fed ex­pects in­fla­tion to re­main be­low 2 per­cent through 2016, and re­main at between 1.1 per­cent and 1.2 per­cent for the rest of 2013.

The cent­ral bank did, however, pre­dict up­com­ing de­creases in the un­em­ploy­ment rate. The un­em­ploy­ment rate sat at 7.3 per­cent in Au­gust, but the Fed pro­jec­ted Wed­nes­day that it would fall to between 6.4 per­cent and 6.8 per­cent in 2014, and to as low as 5.9 per­cent in 2015.

What We're Following See More »
STAFF PICKS
When It Comes to Mining Asteroids, Technology Is Only the First Problem
1 days ago
WHY WE CARE

Foreign Policy takes a look at the future of mining the estimated "100,000 near-Earth objects—including asteroids and comets—in the neighborhood of our planet. Some of these NEOs, as they’re called, are small. Others are substantial and potentially packed full of water and various important minerals, such as nickel, cobalt, and iron. One day, advocates believe, those objects will be tapped by variations on the equipment used in the coal mines of Kentucky or in the diamond mines of Africa. And for immense gain: According to industry experts, the contents of a single asteroid could be worth trillions of dollars." But the technology to get us there is only the first step. Experts say "a multinational body might emerge" to manage rights to NEOs, as well as a body of law, including an international court.

Source:
STAFF PICKS
Obama Reflects on His Economic Record
1 days ago
WHY WE CARE

Not to be outdone by Jeffrey Goldberg's recent piece in The Atlantic about President Obama's foreign policy, the New York Times Magazine checks in with a longread on the president's economic legacy. In it, Obama is cognizant that the economic reality--73 straight months of growth--isn't matched by public perceptions. Some of that, he says, is due to a constant drumbeat from the right that "that denies any progress." But he also accepts some blame himself. “I mean, the truth of the matter is that if we had been able to more effectively communicate all the steps we had taken to the swing voter,” he said, “then we might have maintained a majority in the House or the Senate.”

Source:
STAFF PICKS
Reagan Families, Allies Lash Out at Will Ferrell
1 days ago
WHY WE CARE

Ronald Reagan's children and political allies took to the media and Twitter this week to chide funnyman Will Ferrell for his plans to play a dementia-addled Reagan in his second term in a new comedy entitled Reagan. In an open letter, Reagan's daughter Patti Davis tells Ferrell, who's also a producer on the movie, “Perhaps for your comedy you would like to visit some dementia facilities. I have—I didn’t find anything comedic there, and my hope would be that if you’re a decent human being, you wouldn’t either.” Michael Reagan, the president's son, tweeted, "What an Outrag....Alzheimers is not joke...It kills..You should be ashamed all of you." And former Rep. Joe Walsh called it an example of "Hollywood taking a shot at conservatives again."

Source:
PEAK CONFIDENCE
Clinton No Longer Running Primary Ads
1 days ago
WHY WE CARE

In a sign that she’s ready to put a longer-than-ex­pec­ted primary battle be­hind her, former Sec­ret­ary of State Hil­lary Clin­ton (D) is no longer go­ing on the air in up­com­ing primary states. “Team Clin­ton hasn’t spent a single cent in … Cali­for­nia, In­di­ana, Ken­tucky, Ore­gon and West Vir­gin­ia, while” Sen. Bernie Sanders’ (I-VT) “cam­paign has spent a little more than $1 mil­lion in those same states.” Meanwhile, Sen. Jeff Merkley (D-OR), Sanders’ "lone back­er in the Sen­ate, said the can­did­ate should end his pres­id­en­tial cam­paign if he’s los­ing to Hil­lary Clin­ton after the primary sea­son con­cludes in June, break­ing sharply with the can­did­ate who is vow­ing to take his in­sur­gent bid to the party con­ven­tion in Phil­adelphia.”

Source:
CITIZENS UNITED PT. 2?
Movie Based on ‘Clinton Cash’ to Debut at Cannes
1 days ago
WHY WE CARE

The team behind the bestselling "Clinton Cash"—author Peter Schweizer and Breitbart's Stephen Bannon—is turning the book into a movie that will have its U.S. premiere just before the Democratic National Convention this summer. The film will get its global debut "next month in Cannes, France, during the Cannes Film Festival. (The movie is not a part of the festival, but will be shown at a screening arranged for distributors)." Bloomberg has a trailer up, pointing out that it's "less Ken Burns than Jerry Bruckheimer, featuring blood-drenched money, radical madrassas, and ominous footage of the Clintons."

Source:
×