Friday, March 18, 2016

Bernanke: Monetary policy 'reaching its limits'
  March 18, 2016

Monetary policy in the United States and other developed countries "is reaching its limits," but the Federal Reserve has not yet run out of responses to a potential slowdown, former Fed Chairman Ben Bernanke wrote Friday.
In a blog post for the Brookings Institution, he argued a "balanced monetary-fiscal response" would better boost the economy than monetary tools alone.

The U.S. central bank this week held its target short-term interest rate range at 0.25 percent to 0.5 percent.(...)
Bernanke said the Fed could use forward guidance, or "talking down" longer-term rates while convincing markets that short-term rates will remain low. If economic weakness warranted a stronger response, the Fed may consider quantitative easing.

Read Ben's Original Post HERE:  What tools does the Fed have left? Part 1: Negative interest rates  
The U.S. economy is currently growing and creating jobs, a situation I hope and expect will continue. We can’t rule out the possibility, though, that at some point in the next few years our economy will slow, perhaps significantly. How would the Federal Reserve respond? What tools remain in the monetary toolbox? In this and a subsequent post I’ll discuss some policy options the Fed might consider, focusing first on negative interest rates. Readers should also be aware of the March 21 conference at the Hutchins Center at Brookings on the tools remaining to monetary and fiscal policymakers should the economy deteriorate.

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