Fed Has Many Tools to Deter Recession, Former Chairman Bernanke Says

Quantitative easing, forward guidance could be equivalent to 3 percentage points of rate cuts, Mr. Bernanke

By David Harrison of The WSJ. Excerpts:

"The Federal Reserve has ample tools for fighting a potential recession even though its benchmark interest rate remains historically low, former Fed Chairman Ben Bernanke said."

"Under the current economic conditions, those methods, known as “quantitative easing” and “forward guidance,” represent the equivalent of up to 3 percentage points of cuts in Fed interest rates, he said."

Economists say broad structural changes to the economy such as an aging population or technological advances will hold down interest rates for the foreseeable future.

Right now, the Fed’s benchmark rate is in a range of 1.5% to 1.75%.

By contrast, rates peaked at 5.25% before the financial crisis."

"Mr. Bernanke’s argument that quantitative easing and forward guidance together account for 3 percentage points of rate cuts could soothe the Fed’s fears."