While the market has been buzzing about the central bank meeting at Jackson Hole and accompanying statement from Federal Reserve Chairman Ben Bernanke for the past week, not much was actually expected to come from it. So it was no real shock to Wall Street when QE3 was not announced.
However, Bernanke hinted strongly that the Fed is ready and willing to initiate additional stimulus to help spark economic growth, which was all the encouragement the market needed despite receiving no timeline for more easing to begin. The Fed could make a major announcement as soon as its next FOMC meeting in September, that is, if the economy does not significantly improve by then. It could also decide to hold off until after the presidential election is over in November.
Perhaps the strongest indication that the Fed could act sooner rather than later was addressing concerns that more stimulus could actually do more harm than good for the struggling economy. Bernanke said that the central bank’s bond-buying program and historically low interest rates have not raised the threat of inflation beyond its ability to manage it.
The primary concern right now is fixing the high unemployment rate, which Bernanke said could inflict structural damages to the economy for many years. Currently, unemployment is hovering around 8.3 percent, while the Fed would like to get that number down to below 7 percent.
Though data has suggested that the economy is improving modestly in housing, job growth in the private sectors, and other key areas in recent, it may not be reason enough to dissuade more stimulus.