Federal Reserve Chairman Ben S. Bernanke will most likely try to impel economic growth this month by wounding near-record-low borrowing costs, His new incentive may not aid the 15 million Americans without work.
Hiring held up in August in the most horrible month for U.S. employment in almost a year. The unemployment rate remained wedged at 9.1 percent.
The Fed may decide at its Sept. 20 to 21 meeting to replace short-term Treasury securities in its $1.65 trillion assortment with long-term bonds in a bid to lower rates on everything from mortgages to car loans, said economists at Wells Fargo & Co., T. Rowe Price Associates Inc., Barclay’s Capital Inc. and Goldman Sachs Group Inc. The Fed’s influence on the economy will probably be muted as drooping consumer confidence, depressed home values and 6 million workers unemployed for six months or more weigh on demand.
“The main problem is that rates have been low for three years now and that isn’t spurring people to buy,” said John Silivia, chief economist at Wells Fargo in Charlotte, N.C. “Companies won’t hire unless demand is there. The Fed can lower the cost of credit, but it can’t force companies to create jobs.”
Silvia predicts the economy will produce at a 1 percent annual rate in the second half of this year, little changed from the 0.7 percent tempo logged in the first six months, the weakest stretch since the recovery began in June 2009.
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