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ECONOMY

Bernanke concerned about US labour market, but no sign of Fed measures

PUBLISHED : Saturday, 01 September, 2012, 12:00am
UPDATED : Saturday, 01 September, 2012, 3:05am

US Federal Reserve chairman Ben Bernanke called the US economic situation "far from satisfactory" but offered no new promises of central bank intervention yesterday.

However, he confirmed that the Fed would move "if economic conditions warrant," as he labelled the labour market stagnation "a grave concern".

"The economic situation is obviously far from satisfactory," he told a conference of central bankers in Jackson Hole. "The stagnation of the labour market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years."

"Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labour market conditions in a context of price stability."

But Bernanke stopped short of committing the Fed to any specific move, such as another round of bond purchases to lower long-term interest rates.

His speech comes two weeks before he leads a meeting of the Federal Open Market Committee to decide whether an expansion of the Fed's record stimulus is needed to spur growth.

US stocks rallied on Bernanke's speech. At midday the Dow Jones industrial average was up 0.6 per cent and the S&P 500 was up 0.41 per cent.

"Most people would like to feel that the Fed is flexible and willing to look at what's needed," said John Carey, of Pioneer Investments in Boston. "I don't know that the Fed has to do something right now."

European shares ended higher, with the FTSEurofirst 300 index of top European up 0.5 per cent. An index of world stocks was up 0.5 per cent.

The euro was up 0.5 per cent at US$1.2562.

Additional reporting by Reuters, Xinhua

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