‘Wrong’ to say Fed is out of policy space, Bernanke argues

Photo: US Fed/Wikimedia Commons

The Federal Reserve has the same amount of policy space to fight a crisis today as at any point in its history, argues former Fed chair Ben Bernanke.

Bernanke estimates that forward guidance and quantitative easing add the equivalent of 3% of policy space on top of short-term rates. The calculations are based on where the Fed’s balance sheet sits at present.

“So I think that saying we are out of space, in the United States, that is wrong,” he said.

Historically, the central bank has reacted

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