Bernanke is talking about the challenges the US economy faces, why the recovery has been lackluster but keeps his optimistic view that the future still looks bright. He also reviewed the Aug 9th FOMC meeting and gave some color on the policy change announced that day. He also reiterated (said also on Aug 9th) that the Fed “has a range of tools that could be used to provide additional monetary stimulus…We will continue to consider those and other pertinent issues” at the next few FOMC meetings. He goes on to defend the role of monetary policy in fostering economic growth (in his opinion) but also notes its limits. He then cited iscal policy as needing to help out. He finished the speech with, while “economic policymakers face a range of difficult decisions…I have no doubt that those challenges can be met and that the fundamental strengths of our economy will ultimately reassert themselves. The Fed will certainly do all that it can to help restore high rates of growth and employment in a context of price stability.” Bottom line, this speech should be as expected as the Fed is at the end of its line with policy but Bernanke doesn’t want to fully admit it yet. The markets reaction is to be expected because of the dependency that last yr created but it should also not be surprised by what was said today.
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