Fed Stimulus Still Needed to Help Recovery, Bernanke Says

[alp227]

Source: new york times

Despite recent improvement in the job market, the Federal Reserve needs to continue its stimulus efforts to avoid endangering the recovery, the Fed chairman, Ben S. Bernanke, told Congress on Wednesday.

While acknowledging the risks of historically low interest rates and the Fed’s aggressive policy of buying government bonds to help stimulate the economy, Mr. Bernanke said in testimony that “a premature tightening of monetary policy could lead interest rates to rise temporarily but also would carry a substantial risk of slowing or ending the economic recovery.”

After his opening statement, however, Mr. Bernanke seemingly opened the door a bit wider to tapering down.

Under questioning by Representative Kevin Brady, a Texas Republican who chairs the Joint Economic Committee, Mr. Bernanke said the Fed could prepare to “take a step down” in the next few meetings if the outlook for the labor market improved.

Read more: http://www.nytimes.com/2013/05/23/business/economy/bernanke-fed-stimulus-still-needed-to-help-recovery.html

[DallasNE]

1. Moving As Early As June Would Be A Big Mistake

Why? Because between March 1st and September 30th the federal government has to squeeze another $85 billion from sequester mandates. The quarter that ends June 30th will not have data on GDP released until late July. Accordingly, anything before August would be a shot in the dark and not very wise. I'm sure the minutes would show that the new voting member from the Kansas City branch is pushing for the June change as she is a Reagan supply sider to the core. Also, Bernanke's term expires in 2014 and Obama has not hinted on whether he will re-nominate Bernanke so he is likely feeling heat from both sides. (A couple of weeks ago Larry Kudlow had a segment on who would replace Bernanke as if it was a foregone conclusion that he is gone).