Federal Reserve Chairman Ben Bernanke focused on the labor market in his remarks for the National Association for Business Economics (NABE). The key message is that employment has improved, but not enough to take down our guard.
Bernanke lays out the rationale for continuing (expanding) policy accommodation from the Fed at the next meeting in April. Those who are looking for a major shift in Fed policy will be disappointed. Indeed, the argument still holds from his remarks about an extension of the “twist.” The powder on QE3 is still dry, but a tool worth using, especially if the labor market skips a beat in its improvement over the next several months.
Bottom Line : Bernanke made clear that the slack in the labor market is sufficient to sideline the inflation issue for the moment. Ben will continue to resist and override dissenters in his own ranks to keep and perhaps even expand monetary policy accommodation.