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Bernanke wants more action!

October 16, 2010

Reuters recently released an article detailing what was said by the Federal Reserve Chairman Ben Bernanke during his talks at the Financial Stability Oversight Council. What the article doesn’t tell you is that these meetings and this oversight council, were happening and created respectively for the H.R.4173 – Dodd-Frank Wall Street Reform and Consumer Protection Act. The bill was passed in the House of Representatives in 2009 and was effectively signed into law July 21, 2010. The Financial Stability Oversight Council (FSOC) also studies and reports on the effects of the regulations by the Consumer Financial Protection Agency (CFPA).

Bernanke warned a prolonged period of high unemployment could choke off the U.S. recovery and that the low level of inflation presented an uncomfortable risk of deflation, a dangerous downward slide in prices.

“There would appear — all else being equal — to be a case for further action,” Bernanke said at a conference sponsored by the Boston Federal Reserve Bank.

With overnight interest rates already close to zero, many economists expect the Fed to launch a fresh round of bond purchases, perhaps on the order of $500 billion, to push borrowing costs lower at its next policy meeting on November 2-3.

Prices for longer-dated U.S. government debt fell after Bernanke’s remarks as investors bet the Fed would be successful in generating more inflation. Stocks were mixed while the dollar briefly hit an eight-month low against the euro.

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