"Uncertainty surrounding the outlook'' is "even greater than usual,'' requiring the Fed to be "exceptionally alert and flexible,'' Bernanke said in a speech in Charlotte, North Carolina, late yesterday. Officials must "judge whether the outlook for the economy or the balance of risks has shifted materially.''
Bernanke joined Vice Chairman Donald Kohn in acknowledging the threat to spending from reduced access to credit, a shift from their October assessment that growth and inflation risks were "roughly'' balanced. Kohn's remarks stoked investors' expectations for the Fed to lower interest rates again Dec. 11. Global stocks rose today after Bernanke's remarks.
"Bernanke walked through the door that Kohn opened and it increasingly appears that the Fed is on track for another ease in December,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York who used to work at the Fed.