Federal Reserve Chairman Ben Bernanke made one of his periodic treks to Capital Hill to testify before Congress Thursday. In his latest testimony, the chairman indicated the Fed is ready to pump additional stimulus money into the U.S. economy if deemed necessary by the Federal Open Market Committee, which he chairs.
Under Bernanke, the Fed has been unusually creative in providing a range of different stimuli to bolster domestic economic activity. Whether in the form of QE1, QE2, Operation Twist or any of the other monetary activities, the Fed has pumped an unprecedented amount of money into the financial system.
Bernanke would not commit to any specific future stimulative actions or timeframes other than to indicate the Fed is ready to act again if needed.
In his testimony, the Fed chairman did ask Congress to assist in providing an environment more supportive and conducive to increased economic activity. He indicated Congress could move forward with policies designed to support domestic job creation. He also said Congress could make progress on the level of government spending and the related unsustainable increase in government borrowing. Improving tax policies, or at least decreasing some of the uncertainty relating to future tax policy changes, would also provide some additional clarity needed to support business growth.
An additional comment from Bernanke aimed at Congress stated the upcoming fiscal cliff, if left unresolved, could push the U.S. into recession.
Looking outside the U.S. borders, Bernanke said the debt crisis in Europe remains a threat to the health of the U.S. economy and financial system.
The chairman’s testimony comes on the heels of a poor report on the addition of U.S. jobs last month. At 69,000, this level of job creation was the slowest in over a year and at a time when the Fed’s monetary policies have remained highly accommodative.
Using Thursday’s stock market behavior as a broad indicator of the general reaction to the testimony given by Bernanke, U.S. equities traded down from the intra-day highs following the testimony. While many domestic and global factors influence U.S. stock market price movements, the supportive but uncommitted Fed was received with lackluster enthusiasm.