In his speech to an annual Federal Reserve conference in Jackson Hole, Wyo., Chairman Ben Bernanke signaled that the Fed will take more action if the economy and job market don't improve.
Bernanke spoke in detail about the Fed's recent policies, in particular its two rounds of bond purchases. He argued that those actions have helped the economy recover from the Great Recession. Since 2009, the Fed has bought more than $2 billion in U.S. Treasury and mortgage-backed securities. Those purchases have helped lower long-term interest rates and ignited a rally in financial markets.
In a nod to more action, Bernanke noted that the economy could suffer years of damage if unemployment remains high. While the unemployment rate has declined from its peak of 10 percent in October 2009, the rate has been above 8 percent for the past 3½ years. It's now 8.3 percent.
Here are some highlights of what the Fed chairman said in his speech Friday:
— BENEFITS OF STIMULUS
Bernanke pointed to studies that show the Fed's first two rounds of bond purchases have helped lower the yield on the U.S. 10-year Treasury note, which was 1.6 percent on Friday. And he cited another study showing that the bond purchases may have helped boost growth and increased private payrolls by more than 2 million jobs. "Central bank securities purchases have provided meaningful support to the economic recovery while mitigating deflationary risks," he said.
— INFLATION CONCERNS
Critics of the Fed's policies have expressed concern that further bond purchases could fan inflation risks. But Bernanke said the Fed has been monitoring that risk, even when expanding its investment portfolio. "The costs of nontraditional policies, when considered carefully, appear manageable," he said.
— ECONOMY STILL WEAK
Bernanke warned that the economy is "far from satisfactory." Without stronger growth, unemployment will likely stay above healthy levels. (Most economists say "normal" unemployment is below 6 percent.) High unemployment "is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years," he said.
— MORE STIMULUS LIKELY
Bernanke made clear that further progress is necessary, particularly in the job market. While he acknowledged the risks and limits of more Fed action, he made clear that "the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions."