Bernanke: More stimulus help is "appropriate" (Update 1)

Photo courtesy of International Herald Tribune
The chairman of the Federal Reserve, Ben Bernanke, said on Monday he supported a second round of additional spending measures to help stimulate economy.

"With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by Congress at this juncture seems appropriate," Bernanke told the House Budget Committee.

The Fed chairman said the economic outlook was still so uncertain that the optimal size, composition and timing for any new stimulus plan were unclear.

But the Fed chairman said Congress should try to develop a plan that would have its maximum impact when the economy is most likely to be at its weakest. Many if not most private forecasters contend that the economy has already entered a recession, which would seem to argue for measures that would bolster overall spending as soon as possible.

"If Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, homebuyers, businesses and other borrowers," Bernanke said. "Such actions might be particularly effective at promoting economic growth and job creation."

Bernanke also cautioned that "any program should be designed, to the extent possible, to limit longer-term effects on the federal government's structural budget deficit."

In his comments, Bernanke essentially reiterated the grim economic outlook he provided in a speech last week. "The pace of economic activity is likely to be below that of its longer-run potential for several quarters."

Bernanke and his colleagues at the Federal Reserve meeting later this month, and many economists believe they could again lower rates. Earlier this month, the Fed along with the European Central Bank and other central banks all reduced primary lending rates by a half percentage point.

While three months libor has plummeted 36 basis points to 4.02 percent this morning. It gives a signal that credit market has been eased due to the global government actions. Here is the list of full libor (via Across the Curve) :

	10/20	10/17	Change
Overnight	1.51250	1.66875	-.15625
1 Week	2.71875	3.15625	-.43750
2 Weeks	3.08125	3.08125	-.41250
1 Month	3.75125	4.18125	-.43000
2 Months	3.93375	4.30625	-.37250
3 Months	4.05875	4.41875	-.36000
4 Months	3.99250	4.29500	-.30250
5 Months	3.90125	4.20375	-.30250
6 Months	3.82875	4.13000	-.30125
9 Months	3.76875	4.02250	-.25375
12 Months	3.71250	3.97250	-.26000

Chart courtesy of Econompic Data
Related Posts :

1. Sweden guarantees $200 billion in bank loans, Oil Heads Toward $50, India Lowers Key Rate for the First Time Since 2004
2. Overnight Libor Starting to Look Like Overnight Libor

Sources :

1. International Herald Tribune: Bernanke says more stimulus help is "appropriate", October 20, 2008
2. Across the Curve: Full Libor Posting, October 20, 2008

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