Bernanke Hints at Further Interest Rate Cuts
ROBERT SIEGEL, Host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.
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And I'm Michele Norris.
His tone was subdued and fitting for the central bank. Yet, Wall Street was quite excited about comments today from Federal Reserve chairman Ben Bernanke. He signaled that the Fed is very concerned about the health of the economy and is prepared to act.
BEN BERNANKE: In light of recent changes in the outlook and the risk to growth, additional policy easing may well be necessary.
NORRIS: Additional policy easing - the code words for lower interest rates. Just what the stock market wanted to hear.
NPR's John Ydstie has more on Bernanke's remarks.
JOHN YDSTIE: Chairman Bernanke gave his speech at a noontime gathering of housing and financial experts. It was equally anticipated given the recent signs that the economy may be slipping into recession, signs that include poor job growth and a pull back in manufacturing output. Bernanke didn't use the R word in his carefully crafted address, but after the words, he took some questions. And one audience member asked exactly what was on everyone's mind.
Unidentified Man: I'm curious. How do you feel personally? Are you worried about a possible recession this year?
(SOUNDBITE OF LAUGHTER)
BERNANKE: Let me tell you a story.
(SOUNDBITE OF LAUGHTER)
YDSTIE: Bernanke went on to describe working at the National Bureau of Economic Research, the official arbiter of recessions, lamenting how difficult it is to know when they begin and end. But then, he decided to give a more straight- forward response.
BERNANKE: The Federal Reserve is not currently forecasting a recession. We are forecasting slow growth. But we - as I mentioned today, there are downside risks, and therefore it's really important for us to stand ready, as I mentioned, to take substantive action to address those risks and provide some insurance against those negative outcomes.
YDSTIE: Another audience member asked Bernanke about the economic stimulus plans being developed at the White House and in Congress to combat and economic downturn. He said he does look forward to discussing with the plan's authors what they eventually put on the table.
BERNANKE: But for right now, my focus obviously is on monetary policy, which is the immediate tool that we have to try to address the risk that our economy faces.
YDSTIE: Bernanke was also urged by one questioner to clearly state that the Fed's interest rate decisions will not be affected by political pressures as the presidential election reaches a crescendo. Bernanke responded that in his more than four years on the Fed's policy-making board, he had never heard anyone suggest any adjustment in policy should be made because of an upcoming election.
BERNANKE: It's difficult enough to make good policy in the face of a complex economy, complex financial system. We must do the best we can for the economy. Political considerations will play no role. And I assure you as strongly as I can that we will be objective. We will be analytical. And we will do what's right for the economy.
YDSTIE: Much of Bernanke's speech today was a look back at the causes of the subprime lending crisis which is at the root of the economy's current troubles, including adjustable rate mortgages that are forcing homeowners into default as their interest rates ratchet higher. He urged lenders participating in the Bush administration's Hope Now program, which is aimed at helping those stressed homeowners, to be more aggressive. Bernanke said millions more mortgage holders will face higher rates in the next few months and years. And he said lenders need to create systems and staff up more rapidly to handle the flood.
John Ydstie, NPR News, Washington.
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