Bernanke reviewed the monetary policy actions the Fed has taken so far:
[W]ith several years of experience with nontraditional policies [i.e., quantitative easing] both in the United States and in other advanced economies, we know more about how such policies work. It seems clear, based on this experience, that such policies can be effective, and that, in their absence, the 2007-09 recession would have been deeper and the current recovery would have been slower than has actually occurred.
He concludes:
Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
Nothing in his remarks indicated that another round of quantitative easing would begin immediately, but the effect on U.S. equity and commodities markets was immediate: stock prices dropped, as did the price of gold. Gold traders had been pushing up the price of the yellow metal in advance of today’s speech, expecting an announcement of an imminent easing and a rising demand for gold as an inflation hedge.
Crude oil prices also fell about 0.5% after Bernanke’s speech.
A full copy of his remarks is available here.
Paul Ausick
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