FOXNews.com: Bernanke could signal Fed's next step in Hill testimony

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Bernanke could signal Fed's next step in Hill testimony Jul 17th 2012, 12:40 Chairman Ben Bernanke could offer clues Tuesday about whether the Federal Reserve is poised to take another step to jolt the sluggish U.S. economy when he appears before Congress.  Bernanke will give his semiannual report to the Senate Banking Committee and to the House Financial Services Committee Wednesday. His testimony comes as job growth has slumped, manufacturing has weakened and consumers have grown more cautious about spending.  Investors are hoping Bernanke will signal another round of bond purchases is on the way. The purchases seek to push down long-term interest rates and encourage more borrowing and spending. The first two rounds triggered powerful rallies in the U.S. stock market.  The economy was already sputtering when the Fed's policymaking committee last met June 19-20. At that meeting, the Fed decided to extend a program that shifts its bond portfolio to try to lower long-term interest rates.  Minutes of the June meeting show that Fed officials were open to taking further action but were divided over whether the economy needs help now.  Since then, the government has reported that job growth slowed sharply in the April-June quarter -- to 75,000 a month from 226,000 a month from January through March. The unemployment rate stayed at 8.2 percent last month.  More dismal news arrived Monday. Retail sales fell in June for the third straight month, the government reported. The International Monetary Fund shaved its estimate for global and U.S. growth for this year and next. And the IMF warned that Europe's financial crisis and a potential budget crisis in the United States could slow world growth even further next year.  Former Fed official Roberto Perli, managing director at the research firm International Strategy & Investment, doubts the Fed will take action at its next meeting July 31-Aug. 1, preferring to wait for more evidence of where the economy is headed.  But if growth and job creation continue to weaken, he said, Fed policymakers might unveil another round of bond purchases at its Sept. 12-13 meeting.  Perli said they might consider new ways to stimulate economic growth, including a version of a new Bank of England program that provides cheap money to banks that increase loans to businesses and consumers.  Chris Jones, economist at TD Economics, said the case for more aggressive action by the Fed is getting stronger as the economy weakens and the threat of inflation recedes.  Some analysts have suggested that the Fed may be reluctant to be aggressive in a presidential election year out of concern it could be seen as affecting the vote in November. But Jones noted that the Fed slashed interest rates and took other bold steps to help the economy on the eve of the 2008 election.  "The Fed is going to do what it needs to do, when it needs to do it," Jones said.

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