Perhaps Ben Bernanke has been reading the Financial Times. Last week Professor Michael Woodford of Columbia University and Mohamed El-Erian of Pimco wrote columns for the paper urging the US Federal Reserve chairman, in his keenly awaited speech at the Jackson Hole conference, not to propose a third phase of asset purchases – so-called quantitative easing. Mr Bernanke did as they advised (in that respect). On Friday, at the annual central bankers’ gathering in Wyoming, he said the Fed would keep its options open but he made no case for QE3.
This is a pity. I suspect Mr Bernanke agrees. Revised figures show the sluggish US recovery has been even slower than previously believed, and this calls for fresh monetary stimulus. The trouble is, Mr Bernanke would have to convince dissenting members of the Fed’s policymaking committee. In the face of gathering political resistance, he would also have to explain the policy to the country – difficult under the Fed’s present terms of engagement.
