Federal Reserve Chairman Ben Bernanke testified in front of the Joint Economic Committee this morning, talking about the big threats to recovery in the U.S. economy and promising that the Fed can and will do more to spur on the recovery “in the context of price stability.”
Here are the most important tidbits:
– “The economy is close to faltering,” he said. He also downplayed the expected impact of Operation Twist, saying it should cut long term rates by about 20 basis points.
– Bernanke argued that the Fed does have further tools to promote economic recovery, naming clarity, altering the fed funds rate, and changing the way the Fed pays interest as possible instruments. Not incredibly inspiring.
– “We have no immediate plans for QE3,” Bernanke said.
– Bernanke emphasised that Congress needs to outline a “strong, credible plan” that would make government spending sustainable without inhibiting short-term recovery. He said Congress should be careful to avoid the kinds of spending cuts that would do just that.
– The Chinese government’s currency policy “is blocking” global recovery, though Bernanke fell short of advocating U.S. action to affect exchange discrepancies.
– “We’re kind of innocent bystanders” unable to truly impact the eurozone crisis right now, Bernanke told the committee. He went on to emphasise that the European Central Bank has the capability to support its banks, which are currently not the targets of European aid. He reassured the Committee that the U.S. is not vulnerable to ECB losses.
– This summer’s debate over raising the debt ceiling kept Bernanke up at night. He says the Fed was indeed working to figure out what to do in the event that Congress failed to pass a timely plan to raise the debt limit.
DON’T MISS: Our detailed coverage of Bernanke’s testimony.