TEXT OF STORY

TESS VIGELAND: We heard ad nauseum in December about how it was a bad holiday season for retailers. Today sales numbers proved it. Any sort of consumer spending slowdown raises the pressure on the Fed to lower short term interest rates to avoid a recession.
During a speech in Washington today, Chairman Ben Bernanke indicated another rate cut may be in the offing. John Dimsdale reports.

JOHN DIMSDALE: Forecasters at most big Wall Street investment banks say the economy is probably in a recession. Many criticize the Fed for not aggressively cutting interest rates to jump-start the sputtering economy. Today, Chairman Bernanke pointed out the Fed has already cut rates by a percentage point over the last four months.

BEN BERNANKE: The Federal Reserve is not currently forecasting a recession. We are forecasting slow growth. But as I mentioned today there are downside risks and, therefore, it is very important for us to stand ready, as I mentioned, to take substantive action.

The prospect that “substantive action” means lower interest rates, caused at least a temporary uptick in the stock market. But Fed watcher David Jones says Bernanke’s reputation is that he’s not a take-charge chairman.

DAVID JONES: I think the markets want a strong Fed leader. Wants him to be authoritarian as former Fed chairman Greenspan was and particularly in dealing with this credit crisis which, in fact, has led us into a recession. It may be OK to give the Fed as an organization greater power and depersonalize the chairmanship in normal times. These are not normal times.

However, another Fed watcher, Bank of America’s Mickey Levy, likes a more democratic Fed. And he thinks the members have interest rates just about right.

MICKEY LEVY: They’re keeping themselves firmly grounded in trying to alert the market that their long-run objective is still low inflation. So I give Bernanke high marks.

The Fed’s next meeting is less than three weeks away.

In Washington, I’m John Dimsdale for Marketplace.