Federal Reserve chairman Ben Bernanke has expressed surprise at the slowdown of the US economy and laid out four possible policy options.
He told fellow central bankers at the annual Jackson Hole symposium in Wyoming that the recovery had slowed to "a pace somewhat weaker" than forecast.
With interest rates already at zero, he said the Fed would take further "unconventional" measures if needed.
Top of the list was more "quantitative easing" - mass purchases of debt.
His speech came in the wake of a string of disappointing US economic data in the last month, that point to a sharp slowdown in the second half of the year.
Only hours earlier, the US Commerce revised down its estimate of second quarter GDP growth to 1.6%, from 2.4% previously.
Unorthodox toolkit"The issue at this stage is not whether we have the tools to help support economic activity and guard against disinflation [a falling rate of inflation]," Mr Bernanke said.
He said the unorthodox policy options each contained risks and would only be used if the outlook worsened further.
Mr Bernanke was keen to emphasise the apparent success of earlier quantitative easing - including the purchase of $1.25 trillion worth of mortgage debt - in lowering borrowing costs.
The Fed already decided to extend this policy on 10 August, when it announced that any mortgage repayments it received on its investment would be reinvested in US government bonds.
Other options included reducing to zero the interest paid on excess reserves held by banks with the Fed, committing to maintain rates low for a longer period, and raising the Feds inflation target.
Sluggish recoveryIn his review of the US economy, Mr Bernanke expressed particular surprise at the rise in the savings rate of US consumers, and the sharp rise in the US trade deficit.
He also noted that business investment in structures - such as commercial real estate - had failed to rebound.
In order for the recovery to be sustained, he said, consumer spending and business investment needed to pick up more quickly.
Posts
