Federal Reserve Chairman Ben Bernanke says the Fed will consider making another large-scale purchase of securities if the slowing economy were to deteriorate significantly and signs of deflation were to flare. The Fed chief offered his most extensive thoughts yet on how to pull the U.S. economy out of a deepening slump. His remarks came 90 minutes after the government said the economy slowed sharply in the second quarter to a 1.6% pace. Fears are growing that the country could lapse into another recession. Bernanke described the economic outlook as “inherently uncertain” and says the economy “remains vulnerable to unexpected developments.” Bernanke stopped short of committing to any specific action. But he raised the prospect of another Fed purchase of securities, most likely government debt or mortgage securities, to drive down rates on mortgages and other debt in order to spur more spending by Americans.
The other two options Bernanke laid out are:
—Providing more information in the Fed’s post-meeting policy statements about how long Fed policymakers would continue to keep rates at record lows. For more than a year, the Fed has been pledging to hold rates at ultra-low levels for an “extended period.”
—Cutting to zero the interest the Fed pays for banks to keep money parked at the Fed. That rate is now 0.25%.
