Fed Chairman Ben Bernanke may have the most thankless job in Washington. He leads a central bank that has maintained a policy of near zero rates for almost four years and has held two rounds of large-scale asset purchases in order to revive a sluggish economy. But growth remains below 2 percent and unemployment continues to top 8 percent.
In addition, there's the looming nightmare of the economy potentially falling off a fiscal cliff if Congress does nothing to avoid massive spending cuts and tax increases due to take effect early next year. And Republican presidential nominee Mitt Romney has vowed to fire Bernanke if he wins the presidential election. (Romney technically can't fire the chairman whose term ends in early 2014 but he can potentially make it more difficult for Bernanke to stay.)
Despite it all, Bernanke is sticking with his policies. "The Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions," Bernanke said last Friday at the annual monetary policy conference in Jackson Hole, Wyoming. Stock markets had a mixed reaction to his speech but ended the day higher on Friday.
The Daily Ticker's Henry Blodget says the Fed has done all it can do to help the economy. But is it working?
The evidence is mixed. Second quarter GDP was revised higher last week, showing annual growth of 1.7 percent and recent housing data suggest that that market has bottomed. But this morning the Institute of Supply Management reported that manufacturing activity continued to contract and fell at its fastest rate in more than three years. Hiring in that sector fell to its lowest level since 2009 and new orders, a forward-looking indicator, had its worst showing since April of 2009.
A major problem for the Fed, says The Daily Ticker's Aaron Task, is the failure of Congress to do anything to avoid the fiscal cliff. That is Bernanke's "great frustration," Aaron notes.
Fed policymakers will review the fiscal situation and the latest economic data when they meet next Wednesday and Thursday. In the meantime, the European Central Bank will meet this Thursday to decide if it too will adopt a bond purchasing program to address the region's debt crisis. Stay tuned.