QE When You Least Expect It

Ben Bernanke reassures us that he has “A range of tools that could be used to provide additional monetary stimulus.”  While everyone speculated Jackson Hole would host another big announcement because that’s where it happened last time, Bernanke insists that if QE3 or some other program happens, it will be on the committee’s timetable, not the media’s.  So, basically, he’s saying, “listen, we’ve got you covered — but I hope you like surprises because I’m not gonna make this easy on you guys.”

In light of its current outlook, the Committee recently decided to provide more specific forward guidance about its expectations for the future path of the federal funds rate. In particular, in the statement following our meeting earlier this month, we indicated that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. That is, in what the Committee judges to be the most likely scenarios for resource utilization and inflation in the medium term, the target for the federal funds rate would be held at its current low levels for at least two more years.

In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus. We discussed the relative merits and costs of such tools at our August meeting. We will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September, which has been scheduled for two days (the 20th and the 21st) instead of one to allow a fuller discussion. The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability.

Read: Chairman Ben S. Bernanke Jackson Hole, Wyoming — August 26, 2011 (FRB)


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