As the consensus view predicted, Bernanke did not signal further stimulus today, although he urged Congress to get a grip and roll out some meaningful fiscal stimulus. He also urged them to not underestimate the fragility of the present economy. At the same time Bernanke reiterated his (wishful thinking) belief that growth may pick up in the second half. And if it doesn’t, he says more monetary tools will be up for experiment, maybe as early as the next Fed meeting September 21 if need be. By then we may well have further evidence of a still falling stock market and a contracting economy.
Will the impotent Congress get any stimulus passed by then? I am increasingly thinking that the Republicans have a very short-sighted, selfish reason to not agree to further policy help now–as a year of further economic hell may well serve to thwart Obama’s re-election bid. The Republicans seem to have a huge conflict of interest here between helping this government act and their own interest in having the Democrats tossed. Impasse indeed. Watch a Bloomberg summary here.