Business Analysis- Current Event- Bernanke and the Economy

Ben Bernanke, the chairman of the Federal Reserve, recently visited Capitol Hill. Bernanke spoke with Congress on issues related to the economy and monetary policy. Bernanke addressed the two main risks currently present within the economy. The first being the Euro economic crisis, and the second being the United States fiscal dilemma. Bernanke urged Congress to consider actions to address fiscal policy. Bernanke indicated that it is critical to take action, however, the short term impact of their decisions should be considered given the current state of the economy. In addition to those risks Bernanke also discussed the current state of the economy. Bernanke described slowed growth, and slower than previously anticipated improvement in unemployment. Congress was also interested in what actions could be taken by the Federal Reserve to improve the slowed economic growth.

“Easing tools include further purchases of Treasuries and mortgage-backed securities, and altering the Fed’s language on the outlook for interest rates, Bernanke told the Senate Banking Committee in Washington yesterday. Another option is to use the so-called discount window for direct lending to banks” (Kearns and Torres, “Bernanke Outlines Range of Options for Additional Easing”).

Although many tools were discussed Bernanke never indicated which tools would be used or exactly when these actions could take place.

“Federal Reserve Chairman Ben Bernanke told lawmakers Wednesday it was "certainly possible" that the central bank could take new steps to support the economic recovery if the jobs market doesn't show gains” (Crittenden and Peterson, “Bernanke Defends Fed Policies, Remains Cautious”).

So the underlying question for managers is what tools will be used and when will these tools be implemented. In an attempt at reading between the lines many economist believe QE3 is likely to happen. There are even speculations that QE3 could take place as soon as September.

“The Federal Reserve is on track to release a fresh round of quantitative easing, according to economists at major banks like Goldman Sachs and Nomura” (Fontevecchia, “QE3 Is a-Comin”).

The decisions and timing of the Fed have substantial impacts on businesses. Analyzing the possibilities and weighing available opportunities/risk is crucial for successful managers. Opportunities such as cheaper lending could give managers needed access to capital for growth. Decisions affecting the strength of the dollar can impact imports and exports. Exchange rates can fluctuate substantially following a decision by the Fed, which can have drastic impacts on global business decisions.  Although no manager can know exactly what the Fed is going to do, analyzing the likely courses of action is necessary to utilized opportunities or decrease the risk associated with the outcome.

Works Cited:

Crittenden, Michael R. and Peterson, Kristina. “Bernanke Defends Fed Policies, Remains Cautious.” WSJ. n.p., 18 July 2012. Web. 19 July 2012.


Fontevecchia, Agustino. “QE3 Is A-Comin'.” Forbes. n.p., 17 July 2012. Web. 19 July 2012.


Kearns, Jeff and Torres Craig. “Bernanke Outlines Range of Options for Additional Easing.” Bloomberg. n.p., 17 July 2012. Web. 19 July 2012.   


Link to Forbes article
Link to Bloomberg article
Link to WSJ article