Fed Chairman Ben BernankeJ. Scott Applewhite
As the U.S. Federal Reserve Board holds its annual meeting at Jackson Hole, Wyo., on Friday to "reflect on the crisis," Bank of Montreal economist Jennifer Lee looks back at chairman Ben Bernanke's past speeches to the gathering.
Aug. 25, 2006:
Just half a year into his new job, Mr. Bernanke covered the topic of "The New Economic Geography: Effects and Policy Implications". During this time, the housing market was already correcting but there were still rumblings about resuming the tightening cycle (which makes it more difficult and more expensive to borrow money.) The Fed at that point had stopped a two-year tightening cycle, staying on hold in August for the first time since May, 2004.
Aug. 31, 2007:
The chairman discussed "Housing, Housing Finance, and Monetary Policy." This was two weeks after the discount rate was cut by 50 basis points to 5.75 per cent in an unexpected move.
Central banks around the world had been intervening in the markets to alleviate a cash crunch, and the U.S. subprime problem was in clear view. The heat was on and in the last four months of 2007, the Fed cut interest rates by 100 basis points.
Aug. 22, 2008:
The recession was in full swing - although it was not officially declared yet - and Mr. Bernanke spoke on "Reducing Systemic Risk," with references to Bear Stearns made throughout.
(Bear Stearns was one of the largest U.S. investment banks prior to its sudden collapse and distress sale to JPMorgan Chase in March, 2008.)
During that same week, there was nervousness that Freddie and Fannie would be taken over, and there was speculation of a Lehman Brothers takeover. A month later, the Federal Reserve started taking the axe to rates, and chopped the funds rate over 175 basis points before the year was done.
Aug. 21, 2009:
Now here we are in 2009. The U.S. economy, beaten and battered, appears to have bottomed, but it remains weak and nerves are still frayed.
The Fed chairman said strains in financial markets persist worldwide, financial institutions face "significant additional losses on soured investments" and many businesses and households are are experiencing "considerable difficulty" in getting loans. Restoring the free flow of credit is a critical component to a lasting recovery, he said.
Still, the U.S. economy is on the verge of recovery and prospects for a return to growth "appear good," Mr. Bernanke said.
On Aug. 12, the Fed decided to keep its benchmarket interest-rate target unchanged at a record low, between zero and 0.25 per cent, saying economic conditions are likely to warrant keeping the rate exceptionally low for an extended period.
Source: Bank of Montreal economist Jennifer Lee, Globe and Mail Update