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August 27, 2010

Making plays: Point guard Bernanke on 1.6% "crawl" in Q2

Getting "unconventional" is fine with us, Ben. Have at it. AP: "Fed Consider Another Large Purchase of Securities". In part:

JACKSON HOLE, Wyoming — Federal Reserve Chairman Ben Bernanke said Friday that the Fed will consider making another large-scale purchase of securities if the slowing U.S. economy were to deteriorate significantly and signs of deflation were to flare.

The Fed chief offered his most extensive thoughts yet on how to pull the U.S. economy out of a deepening slump. His remarks came 90 minutes after the government said the economy slowed sharply in the second quarter to a 1.6 percent pace.

"I believe that additional purchases of longer-term securities should the FOMC [Federal Open Market Committee] choose to undertake them, would be effective in further easing financial conditions." he said.

The other two options he laid out are:

--Providing more information in the Fed's post-meeting policy statements about how long Fed policymakers would continue to keep rates at record lows. For more than a year, the Fed has been pledging to hold rates at ultra-low levels for an "extended period."

--Cutting to zero the interest the Fed pays for banks to keep money parked at the Fed. That rate is now 0.25 percent.

Posted by JD Hull at August 27, 2010 11:59 PM

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