Bernanke's Case For More Fed Action, At A Glance

The Associated Press

In his speech to an annual Federal Reserve conference in Jackson Hole, Wyo., Chairman Ben Bernanke signaled that the Fed will take more action if the economy and job market don't improve.

Bernanke spoke in detail about the Fed's recent policies, in particular its two rounds of bond purchases. He argued that those actions have helped the economy recover from the Great Recession. The goal has been to drive down loan rates and encourage borrowing and spending.

Since 2009, the Fed has bought more than $2 trillion in U.S. Treasury and mortgage-backed securities. Those purchases have helped lower long-term interest rates and ignited a rally in financial markets.

In a nod to more action, Bernanke noted that the economy could suffer years of damage if unemployment remains high. While the unemployment rate has declined from its peak of 10 percent in October 2009, the rate has been above 8 percent for the past 3½ years. It's now 8.3 percent.

Here are some highlights of what the Fed chairman said in his speech Friday:

⿿ 'LEARNING BY DOING'

Bernanke said the damage to the economy from the 2008 financial crisis and ensuing recession was "severe" and required the use of "nontraditional" policy steps. The Fed was guided by general principles and "some insightful academic work." But there was limited historical experience. "As a result, central bankers in the United States, and those in other advanced economies facing similar problems, have been in the process of learning by doing."

⿿ BENEFITS OF STIMULUS

Bernanke pointed to studies that show the Fed's first two rounds of bond purchases have helped lower the yield on the U.S. 10-year Treasury note. In October 2008, at the height of the crisis, the yield was nearly 4 percent. A month later, the Fed announced the first round of bond purchases, and the yield began to tumble. By year's end, the yield was just above 2 percent. The yield also fell when the Fed announced the second round of bond purchases in fall of 2010. (It touched a record low of 1.46 percent twice this year, largely because of concerns about Europe's economy. It was 1.58 percent on Friday.)

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