WASHINGTON (AP) — Investors are hoping Chairman Ben Bernanke will at least hint Friday that the Federal Reserve is ready to launch another round of bond purchases to try to lower long-term U.S. interest rates and spur more borrowing and spending.
He’s unlikely to deliver.
Economists who monitor the Fed doubt Bernanke will say anything dramatic when he speaks at an annual economic conference in Jackson Hole, Wyo. Many think a slightly brighter economic outlook has lessened the urgency for the Fed to act soon.
“I don’t expect him to give some significant clue as to what the Fed’s next move is,” says economist Timothy Duy at the University of Oregon.
At the end of every August, economists and central bankers convene in the Rocky Mountains at a symposium organized by the Federal Reserve Bank of Kansas City. They present papers and argue about economic issues. But mostly, they wait to see what the Fed chairman has to say.
In August 2010, Bernanke’s remarks at Jackson Hole triggered a sustained stock-market rally. He hinted then that the Fed might begin a second round of bond purchases, a policy called quantitative easing, or QE2. The Fed did start buying bonds three months later.
See also: What Would QE3 Bring?
The U.S. economy is again struggling to grow. It expanded at a tepid 1.7 percent annual rate in the April-June quarter, the government estimated Wednesday.
Hopes for further Fed action rose last week when the central bank released minutes of its July 31-Aug. 1 meeting. It showed that officials spoke with increased urgency about the need to provide more help for the U.S. economy.
The Fed’s policy committee decided that action “would likely be warranted fairly soon” unless it saw evidence of “a substantial and sustainable strengthening” of the economy. The comment raised expectations that the Fed could announce a move as soon as its next meeting Sept. 12-13.
And in a letter to a House lawmaker last week, Bernanke wrote that “there is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery.”
Still, Duy says, “it’s not 2010.”
Back then, Bernanke feared that the economy might slide into a deflationary spiral in which falling prices pull down business profits and send the economy back into recession.
This year, the economy appears in less danger. Job creation and retail sales last month proved stronger than expected. And in the latest sign of a recovery in housing, home prices rose in June from a year earlier, the first such increase since the summer of 2010. So there may be less pressure on the Fed to act.
“We’ve seen enough tentative improvement that it’s got to give them a little pause,” says Ethan Harris, co-head of global economic research at Bank of America Merrill Lynch.