Federal Reserve Chairman Ben S. Bernanke -- returning this week to the scene of a 2010 speech that foreshadowed a second round of quantitative easing -- probably will disappoint investors looking for him to signal new stimulus.
Bernanke probably won’t use his Aug. 31 speech at the Fed’s annual symposium in Jackson Hole, Wyoming, to suggest a third round of bond buying is at hand, according to economists including Michael Feroli and James O’Sullivan. Members of the Federal Open Market Committee -- who meet next on Sept. 12-13 -- are closely monitoring unemployment and other data and have been divided about whether to spur expansion. The U.S. economy also remains beholden to political decisions made in Washington and in Europe, which is struggling to contain its debt crisis.
Policy makers at the central bank have said they are prepared to provide new stimulus “fairly soon” unless they’re convinced the economy is poised to rebound, according to the minutes of the FOMC’s July 31-Aug. 1 meeting released last week. Bernanke sees “scope for further action,” he wrote in an Aug. 22 letter to California Republican Darrell Issa, chairman of the House Oversight and Government Reform Committee.
Given the division among policy makers and mixed economic data, Eric Green, a former economist at the New York Fed, said Bernanke will want to use the symposium to clarify his views.
Draghi’s Aug. 2 pledge to craft the plan and declaration that the euro is “irreversible” were enough to drive a rally in Spanish and Italian bonds as investors bet the central bank will be able to quell the region’s debt crisis, now in its third year. The yield on 10-year Spanish government bonds fell to 6.42 percent on August 24 from a peak of 7.62 percent on July 24. Ten-year Italian bond yields were 5.71 percent compared with 6.6 percent in July.