Fed promises to focus on jobs to tackle inequality
US central bank backs away from targeting growth rather than inflation and jobs
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.
Thursday 03 November 2011
The chairman of the Federal Reserve, Ben Bernanke, promised to focus the efforts of the US central bank on reducing unemployment, telling the Occupy Wall Street movement that job creation is the best way to tackle its concerns over inequality.
But he added that growing inequality was an intractable issue that stretched back 30 years, and urged protesters not to blame the Federal Reserve. Criticisms of the Fed for helping bail out Wall Street in 2008 are based on "misconceptions", he said. The assistance to banks was based on the need to prevent a financial collapse that would have sent unemployment even higher.
Mr Bernanke tackled the anger on display in protests around the US and across the world head on in his latest press conference, which followed another Federal Reserve monetary policy statement that highlighted weakness in the labour market. "I understand that many people are dissatisfied with the state of the economy," he said. "I'm dissatisfied. Unemployment is far too high... The best way to reduce inequality is to create jobs."
The Fed is discussing setting a formal unemployment target as part of a revamp of the way it communicates monetary policy – something that economists say could spur the bank to work harder to stimulate the economy. However, no decisions were made at the two-day meeting of the Federal Open Market Committee, which ended yesterday. Mr Bernanke did indicate that it was unlikely the Fed would set a GDP target, though, as at least one FOMC member has been urging, but the issue of unemployment and inflation targets was left open.
The Fed has a dual mandate, to keep inflation stable and to ensure full employment in the US. "The area we have fallen short is on the unemployment side," Mr Bernanke said yesterday.
His comments came as the Fed ratcheted down its forecast for US economic growth in 2012 and pushed up its forecast for unemployment. The changes reduced its GDP estimate to 2.7 from 3.5 per cent previously and raised its estimate for unemployment next year from 8.0 to 8.6 per cent. Unemployment is currently 9.1 per cent.
Earlier in the day, in its statement on interest rate policy, the FOMC, which sets monetary policy at the Fed, indicated it had a modestly rosier view of the US economy than it did at its previous meeting last month.
The statement is parsed for clues on the direction of US monetary policy by traders and economists on Wall Street and across the world, but this time it gave no hint of any extension to quantitative easing, or printing money to buy bonds, in the hope of pushing down interest rates for homebuyers and businesses.
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