MONEY MATTERS

Ben Bernanke, Chairman of the Federal Reserve, has said that the recent revisions of government economic data showed the recession being deeper and the recovery weaker than their previous estimation. In his speech he has sought to shift more responsibility for driving recovery to fiscal policy rather than retain the focus on monetary policy. The reaction to the fiscal concerns in the U.S. and abroad could be seen in the recent bouts of elevated volatility and risk aversion in financial markets. He also spoke about the debt limit negotiations between the Democrats and the Republicans which turned out bitter, the controversy resulted in the down grade of the U.S. long-term credit rating. This contributed to the financial turbulence during that time.
Ben Bernanke suggested a few steps in terms of fiscal reform. First, it was necessary to achieve long-run fiscal sustainability; second, the federal government ought to avoid fiscal actions that could impede the ongoing economic recovery; third, fiscal policy should aim to promote long term growth and economic opportunity; and finally, there was a need to improve the process for making long term budget decisions so as to create greater predictability and clarity. This will help to avoid disruptions to the financial markets and the economy.

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