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Sunday, August 29, 2010

Are we out of the Recession ? or are we in a double dip Recession

Federal Reserve Chairman Ben Bernanke has smoothed the ruffled feathers of anti-inflation hawks at the Fed by indicating he will only press for more policy easing if the U.S. economic slowdown worsens.

are we out of the Recession ? or are we in a double dip Recession .....

Getting that buy-in may eventually make it easier for Bernanke to rally the Fed to move more aggressively if it is clear that the recovery is stalling.

"The data is likely to do the work convincing more timid members" of the Fed's policy-setting committee, BNP Paribas economist Julia Coronado wrote in a note to clients.

Speaking on Friday at the Fed's annual conference in this mountain resort, Bernanke gave a detailed reading of the wilting economic outlook and a reminder of the weapons the Fed could use to bolster the recovery from the worst U.S. recession since World War Two.

It was a much more nuanced assessment than the statement released by the U.S. central bank on August 10 when it shifted policy by taking new measures to support the economy.

The Fed's move nearly three weeks ago to resume buying longer-term Treasury securities to hold its balance sheet steady, instead of allowing them to continue running off, was a controversial one within the bank's inner sanctum.

Some members of the policy-setting Federal Open Market Committee saw the change as sending a signal to markets that the Fed was closer to major new monetary easing than it was.

 Fed officials question whether recent weakness in the U.S. economy is not merely a soft patch in a recovery that will eventually gather momentum rather than an early warning sign that growth will be too sluggish to support new jobs.

Critics of the move on the Fed's policy-setting panel are wary of further bloating a balance sheet that at $2.3 trillion is more than twice its pre-crisis levels, just to bring down unemployment by an incremental amount.

To the critics, the Fed sent a wrong signal on August 10 when it said it would resume buying Treasury bonds "to support the recovery."
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