Fed has ample clout to fight downturn if toolkit used properly: Bernanke GlobeBusiness
Former U.S. Federal Reserve Board Chairman Ben Bernanke participates in a discussion at the Brookings Institution in Washington January 16, 2014. Mr. Bernanke says the bond-buying programs known as 'quantitative easing' were effective in lowering long-term interest rates.The U.S.
“Forward guidance in the next downturn will be more effective – better understood, better anticipated, and more credible – if it is part of a policy framework clearly articulated in advance,” Mr. Bernanke said. “Both QE and forward guidance should be part of the standard toolkit going forward. Mr. Bernanke said he feels a combination of bond-buying and forward guidance could produce the equivalent of about three percentage points of cuts to the Fed’s target interest rate. Even at the current low levels of U.S. interest rates, that would give the Fed enough ammo to stimulate the economy by about as much as it has in past downturns.
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