Friday, 31 August 2012

Bernanke Speech Jackson Hole 2012 - Options at the Zero Bound

The full text of Bernanke's speech of 31st August which seems to have convinced the market that more easing will be forthcoming. Gold up by $36 to $1,691 breaking resistance levels.

Also an interesting Jackson Hole presentation by Michael Woodford on Central Bank options at the zero bound, particularly around Nominal GDP (NGDP) targeting supporting fiscal stimulus.

Full Bernanke speech; Unsatisfactory employment levels, but he weighs the risks of new action.
Notwithstanding these positive signs, the economic situation is obviously far from satisfactory. The unemployment rate remains more than 2 percentage points above what most FOMC participants see as its longer-run normal value
The Economist concludes that Bernanke will ease on 13th September, despite the criticisms from left or right.

Another very interesting paper presented by Michael Woodford at Jackson Hole on policy options at the zero bound. Emphasis on communications. Nominal GDP targeting is touched on here.

commitment to a nominal GDP target path by the central bank would increase the bang for the buck from fiscal stimulus, by assuring people that premature interest-rate increases in response to rising economic activity and prices would not crowd out other types of spending than those directly affected by fiscal policy. And the existence of the central bank’s declared nominal GDPtarget path should also limit the degree of alarm that might arise about risks of unbridled inflation when special fiscal stimulus measures are introduced. For thosewho worry that fiscal stimulus always comes too late and goes too far, there would be the central bank’s commitment to revert to a policy of active control of aggregate demand through monetary policy once the nominal GDP target path is reached.

Referenced at FT Alphaville discussion, with Andy Haldane also discussing regulation.

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