Bernanke says recovery softer, Fed prepared to buy more | Reuters

Reuters, 27/08/2010, excerpt/extracto.-

Federal Reserve Chairman Ben Bernanke said on Friday the economic recovery has softened more than expected and the Fed is ready to take further steps if needed to spur the stumbling economy.

'The committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly,' he said in remarks prepared for delivery at a Fed conference.

Bernanke said the U.S. central bank's purchases of longer-term securities have been effective in lowering borrowing costs and that he believes the benefits of buying more such assets, if needed, would outweigh any disadvantages.

Paul Krugman: Paralysis at the Federal Reserve - NYTimes.com

NYTimes.com, 12/08/2010, extracto/excerpt.-

Ten years ago, one of America’s leading economists delivered a stinging critique of the Bank of Japan, Japan’s equivalent of the Federal Reserve, titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” With only a few changes in wording, the critique applies to the Fed today.

At the time, the Bank of Japan faced a situation broadly similar to that facing the Fed now. The economy was deeply depressed and showed few signs of improvement, and one might have expected the bank to take forceful action. But short-term interest rates — the usual tool of monetary policy — were near zero and could go no lower. And the Bank of Japan used that fact as an excuse to do no more.

That was malfeasance, declared the eminent U.S. economist: “Far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution and its defensive response to criticism.” He rebuked officials hiding “behind minor institutional or technical difficulties in order to avoid taking action.”