By Brai Odion-Esene

WASHINGTON (MNI) – Federal Reserve Chairman Ben Bernanke Wednesday
refused to rule out the possibility that the central bank might inject
additional stimulus into the U.S. economy, even though the Fed’s
policymaking Federal Open Market Committee noted after its meeting that
“economic growth strengthened somewhat in the third quarter.”

Asked by Market New International at his quarterly news conference
if it was fair to assume that the FOMC is less aggressively considering
more monetary accommodation given the improvement it saw in Q3, Bernanke
said that option remains available to Fed officials.

“We did see some improvement in the third quarter,” Bernanke
replied, but stressed that it was “a modest improvement.”

He noted that consumption spending was stronger, there was a
reasonable amount of capital investment, and lower inventories — which
suggests more production in the fourth quarter.

“So it looks like the fourth quarter as well will be a moderate
growth quarter,” Bernanke said.

However, the Fed chairman continued, the Fed’s medium-term outlook
has been downgraded relative to the previous economic forecasts released
after the June FOMC meeting.

“The outlook remains unsatisfactory over the next few years, and
we’ll continue to ask ourselves whether or not additional stimulus or
additional actions can provide a better outcome,” Bernanke said.

“That’s certainly something that remains on the table and we’ll
continue to evaluate as we go forward,” he added.

The latest economic projections by Federal Reserve Board members
and Bank presidents — now released ahead of Bernanke’s news conferences
— put off notable improvement in economic conditions further into the
future.

The biggest change was in the growth outlook, with GDP this year
seen no higher than 1.7% when in June the top was 2.9%, more than a
percentage point higher.

The growth in inflation-adjusted gross domestic product now is seen
crossing the threshold to 3% in 2013 instead of next year.

The unemployment rate won’t get below 8.5% next year in the latest
set of forecasts instead of as low as 7.8% in their June outlook.

Inflation, as measured by personal consumption expenditures, is
higher this year, but just about the same after as previously projected
after that.

Core PCE inflation is moderately upgraded this year, and also
nearly the same from then on.

Bernanke had cautioned in his opening statement that these
estimates are “inherently uncertain and subject to revision.”

“The pace of progress is likely to be frustratingly slow,” he said,
noting that EU-related worries have likely had an adverse effect on
economic growth. The Fed, he added, will continue to monitor
developments on that front “very closely.”

“It is a bit frustrating,” Bernanke said of the progress being made
towards resolving the sovereign debt crisis, but said ultimately the
responsibility of finding a solution lies with EU leaders.

The United States cannot disassociate itself from Europe, Bernanke
said, voicing his hope that EU policymakers “find a set of solutions
that will allow markets to calm down and take some of the headwind from
the U.S. economy.”

Bernanke said the Fed, Treasury Secretary Timothy Geithner and
other U.S. economic policymakers do confer regularly with their European
counterparts and provide advice. “Sometimes they take it and sometimes
they don’t,” he said.

On this side of the Atlantic, all the Fed can do to guard against
potential spillovers is assess the exposure and linkages of U.S. banks
to EU financial institutions and sovereign debt, Bernanke said, as well
as examine money market funds with connections to Europe.

The other thing the Fed can do, Bernanke added, is stand ready to
provide whatever support is needed to the broader economy and financial
system should conditions worsen.

“We are hopeful that the latest measures vigorously implemented
will indeed ultimately reduce these stresses but in the case that things
do get worse both monetary policy and our policies of lender of last
resort are available to insulate the U.S. economy from the effects,”
Bernanke said.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,MT$$$$,M$$CR$,M$X$$$]