Bernanke Signals More Easing ,Weaker manufacturing numbers from china

Chairman Ben S. Bernanke is signaling the Federal Reserve will probably add to its record stimulus should the economy fail to make sufficient progress in creating jobs for 12.7 million unemployed Americans.
The policy-setting Federal Open Market Committee yesterday extended its Operation Twist program and will swap $267 billion in short-term securities with longer-term debt through the end of 2012. Fed officials also downgraded their forecasts for growth and employment while noting “significant downside risks” to the economy.
Bernanke, speaking at a Washington press conference, said policy makers are focusing “primarily” on the outlook for jobs in deciding whether to ease further, and more action would be needed without “sustained improvement in the labor market.” Payrolls grew at the slowest pace in a year in May, and the jobless rate has been stuck above 8 percent since February 2009.
“If job growth doesn’t pick up from the recent soft readings in the next few months, then the Fed would likely do more and do a full scale asset-purchase program,” said Dean Maki, chief U.S. economist at Barclays Plc in New York and a former Fed economist. “They’re prepared to take further action.”
U.S. stocks slipped after the Fed cut its estimates for growth and Bernanke said progress in the labor market has slowed. The Standard & Poor’s 500 Index fell 0.2 percent to 1,355.69 in New York. The yield on the benchmark 10-year Treasury note rose four basis points, or 0.04 percentage point, to 1.66 percent.

Fiscal Tightening

Bernanke said the economy is vulnerable to looming U.S. fiscal tightening and fallout from the sovereign-debt crisis in Europe. The FOMC, which has kept its benchmark interest rate near zero since December 2008, reiterated yesterday it expects to keep rates “exceptionally low” at least through late 2014.
“Additional asset purchases would be among the things that we would certainly consider if we need to take additional measures to strengthen the economy,” Bernanke said. “Our tools, while they are non-standard, still can create more accommodative financial conditions, can still provide support for the economy, can still help us to return to a more normal economic situation.”
The Fed said it will sell Treasury securities maturing in about three years or sooner and purchase a comparable amount of securities due in six years to 30 years. The central bank announced the current $400 billion maturity-extension program on Sept. 21, and it is due to expire this month.


Zam-africa (views by kampamba shula ,Bsc Economics)
My view on this matter is twofold.Firstly an effort to curb unemployment is much welcome,my only concern is why we are not noticing the inflationary pressures in the short run.China also recently introduced some QE in the market but it seems that the world economy is in a rather deflationary state (drop in asset prices).The recent drop in the oil price also indicates weaker global demand and with weaker manufacturing numbers coming from china coupled with the EU crisis,the markets may seem to perform better but the real world economy is in for slower growth possibly even contraction.