What are the tools available to Federal Reserve Chairman Ben Bernanke to stimulate growth/avoid a double-dip recession in case the European crisis worsens?
In his latest testimony before the US Congress Bernanke claimed the Fed has options available to accelerate the economy. Lincoln Ellis, the Chief Investment Officer for the Strategic Group however, begs to differ and feels there are few fiscal or monetary options available to the Fed Chairman.
There seems to be a tug-of-war going on between Europe and Asia. The latest 0.25 percent deposit and lending rate cut by the People’s Bank of China bodes well for the markets, though it doesn’t necessarily indicate that the Chinese central bank is overly worried about a so-called “hard landing,” because the rate cuts would have been much faster and deeper in that case.
There’s nothing more of great significance in terms of monetary policy the US Federal Reserve could be doing. They have gone all-out to limit the slow down effects on the economy, and it’s now a matter of time before things start to move up. No amount of fiscal or monetary policy will boost the economy unless the global imbalances work their way through the system, particularly in terms of labor, production and the all important consumption.
