Federal Reserve chairman Ben Bernanke today stopped short of signalling further action to boost growth, but said it was critical for the economy's health to reduce long-term joblessness.
"It is clear the recovery from the crisis has been much less robust than we had hoped," he said in remarks prepared for delivery to an annual Fed retreat.
Mr Bernanke said the Fed will meet for two days in September instead of the planned one to mull its options to provide additional monetary stimulus, among other topics.
The Fed chairman said reducing the record high level of workers who have been unemployed for six months or more would help achieve stronger US economic growth.
"Under these unusual circumstances, policies that promote a stronger recovery in the near term may serve longer-term objectives as well," he said.
The US economy braked sharply in the first half of the year, expanding at less than a 1 per cent annual rate. Analysts do not believe it is faring much better now.
At the same time, Europe is strangled by a debt crisis, and both major economic zones appear at risk of recession.
So far in August, the Standard & Poor's 500 Index has fallen 10 per cent - a figure that papers over some of the daily drops and volatility.
However, stock market investors spent much of this week driving share prices higher on the premise that the Fed would have to begin to snap up more bonds to push borrowing costs lower. The S&P rose nearly 5 per cent through Wednesday before the reality began to set in yesterday that Mr Bernanke was unlikely to lay out any bold policy initiatives.
Over the last five turbulent years, Mr Bernanke has used his speeches at Jackson Hole to assure the public the Fed stood ready to come to the economy's aid.
Last year, he laid groundwork for the Fed's November decision to launch a second bond-buying spree. Although there will be no less attention to his remarks this year, conditions have changed. Inflation is higher and the risk of a vicious deflationary cycle is lower. While growth is weak, Fed officials do not appear particularly concerned about recession risks.
"We will continue on this modest growth path as we go forward," said Kansas City Fed president Thomas Hoenig. "It's not exciting, but it's not a recession."
However, a series of regional factory surveys have suggested manufacturing sector, which has powered the recovery, may be contracting, and jobs growth continues to fall short of what is needed to lower an unemployment rate stuck above 9 percent.
In addition, sovereign credit strains in Europe have not gone away, adding to an overall sense of uncertainty many think is keeping consumers and businesses on the sidelines. With that as a backdrop, economists increasingly think further Fed easing may not be far off.
Reuters/Bloomberg
