Central bankers gathered at an annual retreat in Jackson Hole, Wyoming, this weekend had a message for political leaders: monetary policy alone can’t keep the global expansion going.
Federal Reserve Chairman Ben S. Bernanke urged adoption of “good, proactive housing policies” to reverse the depressed U.S. real estate market and warned lawmakers to avoid steps that may hurt short-term growth. Ewald Nowotny of the European Central Bank Governing Council said euro-area governments should expand the powers of their regional bailout fund.
“Most of the economic policies that support robust economic growth in the long run are outside the province of the central bank,” Bernanke said at the annual conference of policy makers and economists, sponsored by the Kansas City Fed.
The call to arms ended a month in which the Fed and the ECB raced to shield their economies from fiscal tightening and strengthen a world economy that is losing momentum. Reports this week may underscore the challenges faced by policy makers: U.S. payroll growth probably slowed in August, and confidence in Europe’s economy fell to its lowest since April 2010, economists forecast. Fed policy makers will meet for two days in September instead of one so they can discuss options for spurring growth.
Warning of a “dangerous new phase” for the world economy, International Monetary Fund Managing Director Christine Lagarde told the forum that risks have been aggravated by “a growing sense that policy makers do not have the conviction, or simply are not willing, to take the decisions that are needed.”
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