BOSTON, Oct. 15 (UPI) -- Federal Reserve Chairman Ben Bernanke said Friday a sluggish recovery and low overnight fund rates prompted the central bank to take "further action."
"Given the (Open Market) Committee's objectives, there would appear -- all else being equal -- to be a case for further action," Bernanke said in a prepared speech delivered at the Federal Reserve Bank of Boston.
Bernanke made his case for the uncharacteristically direct comment by noting the economic recovery had slowed and inflation remained "subdued."
"Price inflation … has declined from approximately 2.5 percent at an annual rate in the early stages of the recession to an annual rate of about 1.1 percent over the first eight months of this year," he said. He also warned central banks had learned that "inflation can be too low as well as too high."
Bernanke said consumer spending, a major portion of the country's gross domestic product, "has been inhibited by the painfully slow recovery in the labor market, which has restrained growth in wage income and raised uncertainty about job security and employment prospects."
With the Fed's overnight lending rate at zero to 0.25 percent, further action refers to increased bank purchase of Treasury and mortgage-backed securities. The Fed currently has a policy of using income from securities to make further investments, but it has, otherwise, not expanded its holdings since March.
The next policy meeting at the bank is scheduled for Nov. 2-3.
