Federal Reserve Chairman Ben Bernanke was in the news again last week as he spoke at the Kansa City Fed’s Annual Symposium in Jackson Hole, Wyoming. Mr. Bernanke went as far as to say that the Fed will do what it takes to support an economic recovery, but didn’t hint if the Fed will need to act. Mr. Bernanke said that the Fed did favor additional purchases of long-term securities.
“In particular, the Federal Open Market Committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly,” Bernanke said.
The economy has been slowing since the middle of the 2nd quarter and the recovery that began in March of 2009 is showing signs of stalling. With interest rates near zero the Fed may not have many bullets left to combat the slow down.
However, many economists believe that despite the report the Fed still has some ammo left to fight the downturn. The most obvious strategy is that the Fed could purchase longer term securities. Another tool would be lowering the interest paid on excess reserves, which may influence banks to lend out more or its money.
A final tool would be signaling that the Fed will keep short term interest rates close to zero for longer than what the market currently expects, or for an “extended period.”
As far as the labor markets, Mr. Bernanke said that the unemployment rate is expected to fall “slowly” in 2011. The housing market took a noticeable downturn in July with homebuyers moving to the sidelines after the expiration of the tax credit. We will have to wait to see if the housing numbers for August improved.

Did You Know?
CNN reports that the current economy is the biggest stress on married couples in the past 60 years.
With that said, be sure to take the time to acknowledge the good in your life and thank the loved ones around you.