Bernanke: Fed May Buy More Debt

Fed Chairman Ben Bernanke announced Friday that the Federal Reserve may purchase longer-term debt if the economy continues to lag. The decision would lead to an increase in the size of the central bank’s holdings. “We have come a long way, but here is still some way to travel,” Bernanke told the audience gathered for a Fed meeting in Jackson Hole, Wyoming. Bernkanke sounded a note of restrained optimism, saying that he thought the economy would expand in the second half of the year but only at a “relatively modest pace.” Bernanke’s big fear? That the economy could be heading towards the kind of deflation, with the price of items sinking, as occurred in Japan during the 1990s. According to The New York Times, bankers greeted the news that GDP grew 1.6 percent in the second quarter with a “collective sigh of relief.”