Translated material
Bernanke is ready for anything
The head of the Federal Reserve promised to use “unconventional measures” to support the economy
Ben Bernanke, head of the US Federal Reserve System (FRS), reassured world markets by saying that he would do everything to ensure economic growth: at the end of trading on Friday, the main indices rose almost 1.7%. The Standard & Poor's 500 index showed its greatest strength since the beginning of August. However, Mr. Bernanke did not say what specific support measures he was talking about. According to experts, the tools of the monetary authorities are practically exhausted.Speaking at the Federal Reserve's annual conference, which is attended by the heads of the world's leading central banks, Mr Bernanke said US economic growth over the past year has been too weak and unemployment too high. "Incoming data confirms that the recovery in output and employment in the United States has slowed in recent months to a pace that is somewhat lower than we expected earlier this year," Mr. Bernanke said. He acknowledged that consumer spending could continue to grow at a "relatively slow pace in the short term." According to the Fed chairman's forecast, growth will begin in 2011. In the event of a further slowdown in economic recovery, Ben Bernanke promised to use “unconventional measures” of monetary regulation. He said the risks of “an unwanted acceleration in inflation or significant further deflation appear low.” Earlier on Friday, the US Department of Commerce published data that from April to June, the American economy grew by about 1.6% per annum, which is 0.8% lower than previous data.
According to experts, the economy is being pressured by a sharp decline in the housing market and a persistently high unemployment rate of 9.5%. Against this background, consumer spending is declining. In addition, Americans are buying more and more imported products, which undermines the income of local producers. The decline in economic growth has led experts to believe that the risks of a second recession are increasing. “There is still a significant risk, about a one in three chance, that there will be a second wave of recession, a drop in GDP, before we finally emerge from the crisis,” Martin Feldstein, a Harvard University professor and committee member of the National Bureau of Economic Research, told Bloomberg. In this regard, the question arises of continued stimulation for the growth of both the American and global economies.
The head of the European Central Bank, Jean-Claude Trichet, on the contrary, insists on a strategy of tightening monetary policy. Speaking at the conference, he said that the solution to the problem of public debt should not be delayed. According to Mr. Trichet, countries risk experiencing a “lost decade” in which economic growth will be extremely weak.
Ben Bernanke said the Fed's purchases of US Treasuries and mortgage-backed securities have proven to be an effective tool in reducing the cost of borrowing. As you know, in August the central bank decided to resume the purchase of government bonds. “The benefits of buying more of these assets will outweigh the downsides,” the Fed chairman said.
"Bernanke said he would make further changes to monetary policy if needed, but he did not say whether any specific decisions had been made," said the chief economist at JPMorgan Chase & Co. Michael Feroli. -- It would be premature to expect concrete actions from the regulator during the September meeting. However, this cannot be said for sure, especially if the statistics are as disappointing as before.”
New York University professor Nouriel Roubini, who predicted the financial crisis, believes that the Fed can no longer do much to support the economy, since rates have been reduced to almost zero and more than $1.7 trillion in securities purchased. there are no more regulatory measures," Mr. Roubini said.
Nevertheless, investors were encouraged by the words of the head of the central bank. Analysts indicate that the market will remain volatile. BGC Financial chief global markets strategist Michael Purves believes the market will not be bullish or bearish, but wolfish. “The wolf is smaller than a bull or a bear, but it is very fast and decisive,” the analyst explained. According to him, a wolf market will be characterized by a narrow trading range, increased volatility and rapid changes in direction. “With such volatile trading, it will be difficult to analyze the market based on fundamentals,” says Mr Purves. “Therefore, technical analysis will be the best tool to navigate it.” In his opinion, the “wolf” market will last until 2011, until economic recovery accelerates or some other factor pushes the market to a stable position.