US Federal Reserve Chairman Ben Bernanke vowed Friday that the
central bank is prepared to take more actions to keep the credit
crisis from hurting the economy.
"The Federal Reserve stands ready to take additional actions as
needed to provide liquidity and promote the orderly functioning of
markets," Bernanke said at a Fed symposium in Jackson Hole,
Wyoming. His speech was posted on the Fed website.
The chairman did not specify what the Fed's next move will be,
however.
"It is not the responsibility of the Federal Reserve -- nor
would it be appropriate -- to protect lenders and investors from
the consequences of their financial decisions," Bernanke said.
"But developments in financial markets can have broad economic
effects felt by many outside the markets, and the Federal Reserve
must take those effects into account when determining policy," he
added.
In light of recent financial developments, "the uncertainty
surrounding the outlook will be greater than normal, presenting a
challenge to policymakers to manage the risks to their growth and
price stability objectives," said Bernanke.
The Fed "continues to monitor the situation and will act as
needed to limit the adverse effects on the broader economy that may
arise from the disruptions in financial markets," he said.
Since Aug. 9, the Fed has injected a total of US$147.25 billion
into the financial system to ease tightening credit stemming from
the troubles in the high-risk subprime mortgage market, which
offers loans to people with lower credit and income.
On Aug. 17, the Fed approved a half-percentage point cut in its
discount rate on loans to banks to promote the restoration of
orderly conditions in financial markets.
The decision means the discount rate, the interest rate that the
Fed charges to make direct loans to banks, has been lowered to5.75
percent from 6.25 percent.
But the Fed did not change its target for the more important
federal funds rate, the interest commercial banks charge each other
on overnight loans. The benchmark interest rate has remained at
5.25 percent for more than a year.
Many expect the Fed to cut its target rate by at least
one-quarter percentage point on or before Sept. 18, its next
regularly scheduled meeting. If so, that would be the Fed's first
rate cut in over four years.
(Xinhua News Agency September 1, 2007)
