Bernanke Finally Remembers Fed’s Duty to Maximize Employment
October 27, 2010
(ChattahBox Business News)—With the unemployment rate nearing 10 percent, the Federal Reserve Chairman Ben Bernanke is finally ready to take steps to stimulate the economy with the aim of reducing the unemployment rate. It’s long been known that another stimulus effort is needed, as President Obama’s too-small, but successful stimulus program nears its end. But congressional Republicans have blocked any attempt to stimulate the economy with new spending, instead calling for the extension of the Bush tax cuts for the wealthy that would only further add to the deficit and do little to stimulate the sluggish economy. Now, Bernanke is poised to abide by the Fed’s legal mandate to maximize employment. The Wall Street Journal is reporting that the Fed could announce a massive purchase of U.S. Treasury bonds as early as Wednesday. It’s about time.
Fed officials have been hesitant to make a move to increase employment, fearing its efforts could lead to inflation. But with unemployment stubbornly holding at 9.6 percent and inflation at about 1 percent, the time to act is now.
The Wall Street Journal writes:
“But the view likely to prevail at the Nov. 2-3 meeting is that the economy is falling short on two fronts: Unemployment, at 9.6%, means the Fed is falling short of its legal mandate to maximize employment. Inflation, which is running a bit above 1% so far this year, is below the Fed’s informal objective of about 2%, and runs the risk of falling even lower. With so much unused capacity and spare labor, many officials contend, the Fed is unlikely to stoke a worrisome amount of inflation.”
The purchase of U.S. Treasury bonds is not expected to reach the level of nearly two trillion purchased last year, but could reach $750 billion.
Will this be enough to kick start the economy and encourage companies flush with cash, to start hiring again? Let’s hope so.