Bernanke: Nothing’s off the Table (But Nothing’s on the Table Either)

Fed Chairman Ben Bernanke told Congress this morning that “At this point I can’t say that anything is completely off the table,” in response to a question about whether the Fed will take more action to stimulate the economy.

That said, nothing’s on the table either.

Bernanke was careful to say that the Fed needs to further analyze the labor market in particular to determine how badly it’s deteriorated and why. Once the FOMC has done that, it still needs to determine whether it can have any real effect. He also pointedly said that maybe Congress could “take this burden from us.”

Update, 10:53: Indexes are still trading higher since Bernanke began to speak, but have cut their gains, with the Dow recently trading about 68 points higher.

He added that there “may be diminishing returns” from further quantitative easing.

The employment question, he said, is a complicated one:

“The main question we have to address is the likely strength of the economy going forward. The weakness in labor markets may reflect the end of a catch-up period in which employers were off-setting [declines] in employment from the recession. We’ll need to see growth at or above the trend rate. That’s the essential question we have to look at: will there be enough growth going forward to make material progress on the unemployment rate.”

For now “it’s too soon for me to do that.”

“In looking at those options,” he said the Fed needs to determine� “how effective they would be and whether there are costs and risks that would outweigh the benefits they would achieve.”

The housing market, he added “looks to be stabilizing.”

Bernanke said in a prepared statement before the Q&A that the Fed is ready to act if Europe’s woes get worse. Bernanke didn’t specify action the Fed might take, and arguably sounded less aggressive than other Fed officials have in the past week, as they worked to reassure markets that they’re ready to act.

Said Bernanke:

“The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely. As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate.”

He also noted that monetary policy is already “highly accommodative”:

“With unemployment still quite high and the outlook for inflation subdued, and in the presence of significant downside risks to the outlook posed by strains in global financial markets, the [Federal Open Market Committee] has continued to maintain a highly accommodative stance of monetary policy.”