Fed Chairman Ben Bernanke is giving a speech out at the K.C. Fed Symposium in Jackson Hole, Wyoming this morning. His released comments show that he is expecting the economic weakness to persist and that we aren’t in the clear. The good news is that he believes inflation may slow down ahead.
It seems he isn’t contemplating higher interest rates despite a jump ininflation as inflationary pressures will come down later in the yearfrom lower commodity prices.
Bernanke believes that stable commodity prices and slower global growthwill remove much of the inflationary pressures of the first half of2008. Bernanake noted that the increased stability in the dollar andthe decline in commodity prices should all culminate with a slowereconomy to lower prices. He did call the price outlook highlyuncertain and noted that Fed officials will act as necessary to makesure prices moderate.
It also seems that that Bernanke is starting to understand thattraditional methods alone aren’t going to fix today’s problems andthinks officials need to consider ways to improve the financialinfrastructure.
He wants to see better settlement of credit-default swaps, andimprovements on swaps and repos, and wants more mechanisms for the Fedto deal with potential defaults even in non-banking institutions.
If you want to read the full speech you can read that here.
Still, you have to wonder if this is just a prelude to another earnings warning OUT OF THE GOVERNMENT……
Jon C. Ogg
August 22, 2008
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