Federal Reserve Board Chairman Ben Bernanke on Friday said he thought the current high unemployment and low inflation environment would linger into 2011 and as a result there is a “case for further action” on the monetary policy front.
Bernanke did not provide many details on the nonconventional policies that the Fed might take beyond saying the Fed might expand its holdings of longer-term securities. He said evidence suggested that asset buying was an effective way to aid the economy.
Bernanke stressed, however, that there was a need for “caution” because the Fed has little experience in judging the economic effects of more asset purchases.
Bernanke said another step the Fed might consider is to strengthen its pledge to keep rates low for an extended period. The Fed may stress that it expects to keep rates “low for longer than markets expect,” Bernanke said.
U.S. stock futures shed Friday losses to turn higher following Bernanke’s comments. Futures for the Dow Jones Industrial Average turned up 29 points at 11,081 before market open. Those for the S&P 500 added 3.3 points to 1,176.8. Those for the Nasdaq 100 added 10 points to 2,072.
Meanwhile, the dollar continued to take a hit on the prospect of additional easing as the Australian dollar reached parity with the greenback. The dollar index fell to its lowest level since Dec. 2009 on Friday.
Gold extended gains as the dollar remained under pressure, with the December futures contract rising $5.20 at $1,382.80 an ounce.
For more on this story, please go to MarketWatch.