After a poor jobs report and other troubling economic news, Federal Reserve Chairman Ben Bernanke said Wednesday he is ready to do more to stimulate the economy.
Folllowing his remarks, stocks rose after three days of losses. The Dow Jones Industrial Average was up more than 150 points at noon.
Bernanke said the nation faces at least two crises, the fiscal budgetary crisis that Congress is trying to tackle and the unemployment crisis. While Bernanke tried to steer clear of the politics of the debt crisis, he said the Federal Reserve was doing all it could to address unemployment.
He said the Federal Reserve's planned purchase of $600 billion in longer-term Treasury securities that ended in June had the "intended effects of reducing the risk of deflation and shoring up economic activity" by decreasing longer-term Treasury yields and interest rates.
Bernanke began two days of testimony in Congress Wednesday morning with the House Financial Services Committee. On Thursday, he will testify in front of the Senate Banking Committee.
While Bernanke said the Federal Reserve did not expect the securities purchase to be a "panacea" for the country's economic problems, he did not rule out the possibility of purchases in the future.
"On the one hand, the possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support," Bernanke said in his prepared statement.
But Guy LeBas, chief fixed income strategist with Janney Capital Markets, said additional monetary stimulus seemed "unlikely."
"There's still a political backlash against QE2, causing a much tougher argument to make QE3 a reality," LeBas said. QE is short for quantitative easing, the term for using bond purchases by the government to stimulate the economy.
LeBas also said the minutes released this week for the Federal Open Market Committee's June meeting back up his belief that more stimulation is unlikely. In that meeting, only a "few members" would "consider providing additional monetary policy stimulus" if economic growth remains slow and unemployment high.
Bernanke also addressed questions from Congress regarding the troubled housing market and the "continuing weakness" of the labor market. The Labor Department announced on Friday that the unemployment rate increased to 9.2 percent in June.
"We are very focused on jobs," Bernanke told Congress, adding that the Federal Reserve has lowered interest rates to "almost to zero," initiated monetary stimulus in the billions and promoted lending to small businesses.
Almost half of those unemployed have been out of work for more than six months, the highest ratio in the post-World War II period, according to Bernanke.
In the Federal Reserve's semiannual Monetary Policy Report to Congress, Chairman Ben Bernanke steered clear of discussing the nation's fiscal debt crisis and instead assessed the economy's "modest" expansion. But in response to questions from members of the House Financial Services Committee, Bernanke said he hoped "excessive restriction" in spending in the short term doesn't "hamper" economic recovery.
"If you slow economic growth, you affect tax collection as well," Bernanke said.
Bernanke acknowledged the problem of "unsustainable" government spending, such as with rising Medicare and Medicaid costs. But Bernanke cautioned that these are "long term issues" that "don't have to be solved today or tomorrow."
"In part, the recent weaker-than-expected economic performance appears to have been the result of several factors that are likely to be temporary," Bernanke said in his prepared remarks. "Notably, the run-up in prices of energy, especially gasoline and food has reduced consumer purchasing power."