JACKSON, Wyo. — Ben Bernanke is struggling to build consensus among Federal Reserve officials about what steps are needed — if any — to give the economy a boost.
It showed in a speech the Fed chairman delivered Friday that carried a mixed message: He sees the economy improving next year, but he stands ready to take bold action if it falters.
Bernanke acknowledged that the economy is fragile, especially after the government just reported the weakest quarterly growth in a year. And he said high unemployment poses a serious threat. Still, Bernanke remained optimistic enough to repeat the Fed’s forecast for some pickup in growth in 2011 and beyond.
On Wall Street, stocks posted big gains after Bernanke spoke. The Dow Jones industrial average and other indexes all gained more than 1 percent.
The Dow rose 164.84, or 1.7 percent, to close at 10,150.65. The Standard & Poor’s 500 Index rose 17.37, or 1.7 percent, to 1,064.59, and the Nasdaq composite index rose 34.94, or 1.6 percent, to 2,153.63.
The Fed chairman’s colleagues have more latitude to speak their minds bluntly, and many have done so recently.
Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, says keeping interest rates at record lows is a “dangerous gamble” that could unleash inflation or new speculative bubbles in the prices of financial assets.
Fed Governor Kevin Warsh has expressed concern that further stimulative efforts could alarm investors. Fed Governor Elizabeth Duke also is skeptical about more aid.
Charles Plosser, president of the Federal Reserve Bank of Philadelphia, has cautioned against taking further stimulative action while the economy is still growing.
But other Fed members are more concerned about high unemployment and more likely to embrace further stimulus aid.
All that helps explain why Bernanke stopped short Friday of pledging to take any specific new steps now to invigorate the economy, which some economists fear could tip into another recession.
But in speaking to an annual economic conference, Bernanke said the Fed was prepared to make a major new investment in government debt or mortgage securities if the economy worsened significantly or if the Fed detected deflation — a prolonged drop in prices of wages, goods and assets like homes and stocks.
