Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
THEY DON'T RING THE BELL AT THE CRPTO MARKET TOP! - 20th Dec 24
CEREBUS IPO NVIDIA KILLER? - 18th Dec 24
Nvidia Stock 5X to 30X - 18th Dec 24
LRCX Stock Split - 18th Dec 24
Stock Market Expected Trend Forecast - 18th Dec 24
Silver’s Evolving Market: Bright Prospects and Lingering Challenges - 18th Dec 24
Extreme Levels of Work-for-Gold Ratio - 18th Dec 24
Tesla $460, Bitcoin $107k, S&P 6080 - The Pump Continues! - 16th Dec 24
Stock Market Risk to the Upside! S&P 7000 Forecast 2025 - 15th Dec 24
Stock Market 2025 Mid Decade Year - 15th Dec 24
Sheffield Christmas Market 2024 Is a Building Site - 15th Dec 24
Got Copper or Gold Miners? Watch Out - 15th Dec 24
Republican vs Democrat Presidents and the Stock Market - 13th Dec 24
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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.


© 2005-2022 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