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Bernanke: "costs of nontraditional policies, appear manageable, implying we should not rule out further use if economic conditions warrant" (WSJ)

The speeches of the Federal Reserve can almost always have subtle readings. The speech that the Federal Reserve Chairman, Ben Bernanke, made today in Jackson Hole, is no exception. Apparently, Bernanke outlined a scenario that would justify the intervention of more flexible and accommodative monetary policy. But the proximity of U.S. elections may retract any intention from the Federal Reserve to proceed with monetary policy measures that could become the target of politicization in the middle of election campaign. So Bernanke continues to careful manage expectations, saying he has the tools and is available to intervene.

WSJ:
"Some market participants have been wondering if a run of moderately better economic data of late has changed the Fed's thinking about the economy. Mr. Bernanke left little doubt that he is still deeply dissatisfied with the outlook, describing the economic situation as "far from satisfactory." He dwelled on stagnation in the labor market, describing high unemployment as a "grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for years." (...)

Importantly, the Fed chairman also says that the job market's weakness, to date at least, is the result of cyclical problems in the economy (that is, a lack of demand) and not structural problems (such as a mismatch between the skills people have and the skills employers are looking for.)

The focus on labor-market stagnation is critical. The Fed has a dual mandate imposed by Congress to achieve price stability and maximum sustainable employment. Mr. Bernanke played down inflation risks, saying inflation has remained near 2%, "despite repeated warnings that excessive policy accommodation would ignite inflation." With inflation stable and unemployment unsatisfactorily high, Mr. Bernanke in effect lays out his legal argument for pressing on the monetary gas pedal harder."
source: Bernanke Signals Readiness to Do More | WSJ

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