Economy

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Friday, October 15, 2010 - 2:51pm

Retail sales are up; Fed promises action to boost the economy.

Low inflation and high unemployment are weighing down the economy, something the Federal Reserve says it will combat when it meets next month.

While the economy may be recovering, it's not recovering fast enough.

"There would appear, all else being equal, to be a case for further action," Federal Reserve Chairman Ben Bernanke said Friday.

That action will likely be the buying of more treasury bonds, an effort by the U.S. Central Bank to add more liquidity into the markets and ultimately into the pockets of Americans.

Some say the amount needed to be spent on bonds to make an impact is too risky.

"I think there is a lot of risk in what some people think could be a trillion dollars of buying by the Fed," says Martin Feldstein, former chairman of President Reagan's Council of Economic Advisers. "The biggest burden in the long run is going to be this growing national debt."

With unemployment still hovering at over nine percent nationwide, Chairman Bernanke acknowledged consumer spending will remain tight until jobs return.

That was reflected in last month's retail numbers, showing jumps in auto, furniture and hardware store sales but no increase with retailers, a clear sign Americans are holding back.

"The consumer, we think, isn't quite back yet," says KeyBanc retail analyst Ed Yruma. "They are buying very close to need, they are waiting for promotions. You saw a relatively strong September, but a weak August so it's clear the consumer is still stretched."

It's that consumer Bernanke hopes will see most impact when his treasury buying program begins after the Fed meets again in early November.

Retailers worry that may be too late to make a much needed impact for this year's holiday season,
with Christmas just 71 days away.



 

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