Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
2019’s Hottest Commodity Is About To Explode - 15th Oct 18
Keep A Proper Perspective About Stock Market Recent Move - 15th Oct 18
Is the Stocks Bull Dead? - 15th Oct 18
Stock Market Bottoms are a Process - 15th Oct 18
Fed is Doing More Than Just Raising Rates - 14th Oct 18
Stock Markets Last Cheap Sector - Gold - 14th Oct 18
Next Points for Crude Oil Bears - 13th Oct 18
Stock Market Crash: Time to Buy Stocks? - 12th Oct 18
Sheffield Best Secondary School Clusters for 2018-19 Place Applications - 12th Oct 18
Trump’s Tariffs Echo US Trade Policy That Led to the Great Depression - 12th Oct 18
US Dollar Engulfing Bearish Pattern Warns Of Dollar Weakness - 12th Oct 18
Stock Market Storm Crash, Dow Plunges to Trend Forecast! - 12th Oct 18
SP500 Stock Market Sell Off Well Forecast by President Trump - 11th Oct 18
USD and US Tr. Yields Retreat, GBP Gains on Brexit-deal Report - 11th Oct 18
Loss Of Yield Curve "Shock Absorber" Could Mean A Rough Ride Ahead For Markets & Housing - 11th Oct 18
Just How Bearish is the Stock Market’s Breadth? - 11th Oct 18
Here’s Why Gold Stocks, Gold, and Silver Are Great Buys Now - 10th Oct 18
Russian Ruble Technical Chart Analysis and Forecast - 10th Oct 18
Society Trends To Keep in Mind in the USA - 10th Oct 18
[eBook] How to Identify Turning Points in the Market - 10th Oct 18
Euro Vulnerable as Slowing Growth Reveals Underlying Issues - 9th Oct 18
Construction Companies to Watch For in 2019 - 9th Oct 18
ECB Meeting Minutes and US Inflation Data in Focus - 9th Oct 18
Interest Rate Shock-Time to Find Out Who has been Swimming Naked - 9th Oct 18
Unintended Consequences of Expanding Sheffield's Best Ranking State Secondary Schools - 9th Oct 18
Crude Oil Price Trend Forecast 2018 Update - 9th Oct 18
Inflation Is Starting To Heat Up - 8th Oct 18
Stock Market Seasonal Influence at Work - 8th Oct 18
Barrick Randgold Deal Breathes New Life into Gold - 8th Oct 18
Stock Market Sell Off, Dollar Rally Expected, Now What? - 8th Oct 18
The Chartology of Gold and Silver - 8th Oct 18
The Income for Life Playbook - 8th Oct 18

Market Oracle FREE Newsletter

Trading Any Market

Bernanke Keeps Door Open for Additional Stimulus on Weaker Economic Growth

Economics / US Economy Aug 27, 2011 - 02:49 AM GMT

By: Asha_Bangalore

Economics

Best Financial Markets Analysis ArticleChairman Bernanke stressed that the Fed “has a range of tools that can be used to provide additional stimulus” but he was silent on specifics. He mentioned that the costs and benefits of these options were discussed at the August 9 meeting. These details will be available when minutes of this meeting are published on August 30. He reiterated parts of the August 9 policy statement noting that “the Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger recovery in a context of price stability.”


In Bernanke’s opinion, the “growth fundamentals” do not appear to have been modified by the shocks of the last four years. Despite positive developments he sees the recovery from the crisis to be “less robust” compared with expectations. He projects an improved outlook for the second-half as temporary factors which setback economic growth in the first-half of the year have receded. He went on to add that “economic healing will take a while, and there may be setbacks along the way.” In this context he added that the Fed “will remain alert to risks to the recovery, including financial risks.”

In the near term, the Fed expects a moderate recovery to continue and strengthen over time. He noted that the Committee had marked down its outlook for the likely pace of growth over coming quarters. The FOMC views inflation to come in at or below 2.0%, such that it is consistent with the Fed’s dual mandate. Bernanke also indicated that the September 20 FOMC meeting has been changed to a 2-day meeting concluding on September 21, implying that the nature of recent economic data has raised the level of concern at the Fed.

About the long-run outlook of the economy, Bernanke does not expect the long-run potential of the U.S. economy to be materially affected by the crisis and the recession if our country takes the necessary steps to secure that outcome.”

On the fiscal policy front, Chairman Bernanke made two important remarks: First, “U.S. fiscal policy must be placed on a sustainable path that ensures debt relative to national income is at least stable or, preferably, declining over time.” Second, a gentle scolding after the recent federal budget impasse was part of the speech indicating that the “country could be well served by a better process for making fiscal decisions.”


Second Quarter Growth is a Tad Weaker than Prior Estimate

Real gross domestic product (GDP) of the second quarter was revised to a 1.0% gain from the prior estimate of a 1.3% increase. Effectively, the U.S. economy nearly stalled in the first-half of the year. A reduction of prior estimates of inventories and exports made up a large part of the downward revision. Consumer spending and equipment and software spending recorded small upward revisions but were only a partial offset to downward revisions.


Corporate profits rose 3.1% in the second quarter after a 1.0% gain in the prior quarter. However, from a year ago, corporate profits show a decelerating trend. Earnings from the rest of the world moved up 6.6% in the second quarter, while profits of domestic industries rose only 2.1%.

The outlook for the second-half of the year is sluggish growth. Auto production is likely to give a lift to third quarter real GDP growth but it is unclear if this trend will prevail in the fourth quarter. The soft performance of the economy is most likely lead to a higher unemployment rate.


Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Copyright © 2011 Asha Bangalore

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules