Pros and cons of another Fed stimulus plan
Jeremy Hobson: We’re just a couple hours away from a big speech by Fed Chairman Ben Bernanke at a conference in Jackson Hole, Wyo. There’s high anticipation that he’ll announce a new monetary stimulus program to get people to stop saving and start spending.
For more, let’s bring in Jeannine Aversa, who covers the Fed for Bloomberg News. She joins us from Jackson Hole. Good morning.
Jeannine Aversa: Good morning.
Hobson: Do we know anything about whether Ben Bernanke is actually going to launch a new round of stimulus?
Aversa: We can’t say for certain until the chairman speaks. But the thinking at this point is that the Fed chairman will probably keep that door wide open to embarking on a third round of government bond buying.
Hobson: If Bernanke does proceed with another round of asset purchases, what are the rewards for the economy and what are the risks that are involved?
Aversa: The potential rewards for another round of bond buying could be that we drive already low rates, on lend, lower. That would spur people to go out and buy a house, or companies to expand their operations. The risk is that flooding the economy with billions of dollars more risks pushing inflation up much higher down the road, and it could prompt a speculative buying wave — and that could feed another bubble.
Hobson: Jeannine Aversa is a Fed reporter with Bloomberg News. She is covering Ben Bernanke’s speech today in Jackson Hole. Thanks so much for joining us.
Aversa: My pleasure.
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