Don't expect any help from us, Ben Bernanke tells eurozone leaders
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Friday 08 June 2012
Ben Bernanke, the chairman of the Federal Reserve, sent a message of "you're on your own" to European leaders yesterday, telling them there were no policy tools or technical steps the US central bank could take to help ease the pressures in the eurozone.
Instead, in testimony to domestic lawmakers on Capitol Hill, he said the Fed would monitor American banks to make sure any sudden worsening of the euro crisis did not infect the US financial system. And he promised the Fed stood ready to prop up demand in the US if Europe pushes the wider global economy into recession.
"The risks have waxed and waned. The crisis has been going on for more than two years and there have been periods of greater and lesser intensity," he said. "Certainly it is at a point where it is important for European leaders to take additional steps to contain the problem."
US banks are stronger than they were going into the subprime mortgage meltdown of 2007-09, but the situation in Europe "poses significant risks to the US financial system", he warned – and there is an economic effect, too.
"The crisis in Europe has affected the US economy by acting as a drag on our exports, weighing on business and consumer confidence, and pressuring US financial markets and institutions," he said in testimony before the Joint Economic Committee.
Traders were paying close attention to his testimony to see if he would hint at new monetary policy measures to stimulate the US economy, after the most recent economic data suggested the stuttering recovery was slowing once more.
In the wake of a disappointing figure for US job creation last month, and an uptick in the unemployment rate to 8.2 per cent, some other members of the Fed's interest rate-setting committee had raised expectations that it could extend the central bank's policy of quantitative easing.
Under QE, the Fed has printed dollars to buy US government debt to drive rates down, and it has most recently focused purchases on long-dated bonds so as to better affect the rates businesses and homebuyers pay.
Although Mr Bernanke promised that no options were off the table, he cast doubt on whether further action would be necessary.
He said the disappointing jobs figures may not reflect a slowdown, so much as just reflect that employment stayed stronger than usual through the mild winter.
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