Editor's Note: As FTMDaily predicted several months ago, the Federal Reserve has just announced today that it plans to launch a new round of stimulus. We have mentioned that the Fed would make the public beg for this, as stocks tumbled and the economic conditions worsened. However, it doesn't seem like the Fed is shy about their plans anymore. The announcement is even earlier in the year than we expected. However, the announcement is not a shock to all of us here at FTMDaily. Expect more to come as the Fed lays out its plans to "boost" the economy.
CNBC – Federal Reserve Chairman Ben Bernanke told Congress Wednesday that a new stimulus program is in the works that will entail additional asset purchases, the clearest indication yet that the central bank is contemplating another round of monetary easing.
Bernanke said in prepared remarks that the economy is growing more slowly than expected, and should that continue the central bank stands at the ready with more accommodative measures.
"Once the temporary shocks that have been holding down economic activity pass, we expect to again see the effects of policy accommodation reflected in stronger economic activity and job creation," he said
"However, given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium term, the Federal Reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate."
Markets reacted immediately to the remarks, sending stocks up sharply in a matter of minutes. Gold prices continued to surge past record levels, while Treasury yields moved higher as well.
But some analysts pointed out that, while Bernanke was suggesting the Fed might add stimulus, he also was saying that the current "soft patch" may prove temporary.
"The bottom line is that he has to say he will respond if needed, but it seems he's saying it more as lip service than anything because ultimately he still expects that this slowdown was temporary," said Tom Porcelli, chief U.S. economist for RBS Capital Markets in New York.
The Fed recently completed the second leg of its quantitative easing program, buying $600 billion worth of Treasurys in an effort to boost liquidity and get investors to purchase riskier assets.
While stocks rose about 6 percent through the course of the program, nicknamed QE2, economic progress has remained elusive.
Delivering his twice-a-year economic report to Congress, Bernanke laid out three options the central bank would consider.
Bernanke said the Fed could launch another round of Treasury bond buying, the third such effort since 2009. It could cut the interest paid to banks on the reserves they hold as a way to encourage them to lend more.
The Fed could also be more explicit in spelling out just how long it planned to keep rates at record-low levels. That would give investors confidence about the Fed's efforts to continue supporting the economy.
Bernanke maintained that temporary factors, such as high food and gas prices, have slowed the economy. He said those factors should ease in the second half of the year and growth should pick up. But if that forecast proves wrong, he said the Fed is prepared to do more.