09/08/2011 02:47 pm ET Updated Nov 08, 2011

Ben Bernanke: Federal Reserve Will Do 'All It Can' To Help Create Jobs

MINNEAPOLIS (David Bailey) - Federal Reserve Chairman Ben Bernanke on Thursday said the U.S. central bank would spare no effort to boost disappointingly weak growth and lower unemployment, and he downplayed concerns about inflation.

While the Fed chairman did little to disturb expectations of a further easing of monetary policy when officials meets on September 20-21, he offered no details of steps the Fed might take, disappointing some investors

"The Federal Reserve will do all it can to help restore high rates of growth and employment in a context of price stability," Bernanke told the Economic Club of Minnesota.

In what could be taken as a bid to quell concerns among some of his colleagues that a further monetary easing could spark inflation, Bernanke said a rise in prices this year would likely to be transitory.

"We see little indication that the higher rate of inflation experienced so far this year has become ingrained in the economy," he said.

U.S. stocks fell, the dollar extended gains against the euro and Treasury debt prices rose on Bernanke's comments.

"The markets are going to be disappointed in this and concerned that the Fed is only acknowledging the problems without offering any real solutions," said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey.

A widening debt crisis in Europe and collapse in consumer and business confidence in the United States has raised concern the U.S. and global economies could slide back into recession.

So stark is the recent deterioration in the global economic recovery that the political debate in Washington has veered in only six weeks from a preoccupation with how to cut U.S. debts to a renewed urgency on lowering unemployment.

President Barack Obama is scheduled to lay out a jobs package worth more than $300 billion later on Thursday, and job creation was a key theme for Republican presidential hopefuls at a debate late on Wednesday.


Other than offering a bit more detail on the outlook for inflation and emphasizing that sluggish growth is not enough to satisfy the Fed, Bernanke offered few fresh insights into thinking at the central bank on measures to aid the recovery.

He largely reiterated remarks he made two weeks ago, repeating that the Fed has a range of tools to provide additional stimulus and is prepared to use them.

Unusually weak household spending and persistent financial strains spurred by worry over Europe's sovereign debt crisis and the loss of Washington's top-tier credit rating continue to hold back the recovery, Bernanke said.

The Fed chairman warned that overzealous belt-tightening by the U.S. government in the near term could also slow down the "erratic" recovery.

"Substantial fiscal consolidation in the shorter term could add to the headings facing economic growth and hiring," he said.

The U.S. economy expanded at less than a 1.0 percent annual rate in the first half of the year, and looks to be doing no better now. A report on Friday showed job growth had stalled for first time in nearly a year.

The Fed cut benchmark rates to near zero almost three years ago to pull the economy out of a sharp recession. It then bought $2.3 trillion worth of longer-term securities in two installments ending in June to boost faster growth.

But, with confidence crumbling, the Fed on August 9 eased monetary policy further by expanding on an earlier promise to hold rates at rock-bottom levels for an extended period, saying it expected to keep them low at least through mid-2013.

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