Bernanke: Government action needed

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Bill Radke: President-elect Obama’s proposed stimulus package got a vote of confidence this morning. Speaking at the London School of Economics, Fed Chairman Ben Bernanke talked for the first time about the roughly $800 billion recovery plan. As Marketplace’s Jeremy Hobson tells us, Bernanke said Obama’s plan will help. But it’s not enough by itself.

Jeremy Hobson: The Fed Chairman said the new administration’s stimulus package could help the economy recover. But he said further government action will be needed to stabilize the banking system.

Ben Bernanke: History demonstrates conclusively that a modern economy cannot grow if its financial system is not operating effectively.

Bernanke ticked through all the extraordinary measures the Central Bank has taken to address the global financial meltdown, and said more capital injections into financial institutions may be necessary. He noted that despite all the money the Fed and the Treasury have pumped into the economy in recent months, inflation is not a concern.

Bernanke: At this point, with global economic activity weak, and commodity prices at low levels, we see little risk of inflation in the near term.

The Federal Reserve has run out of room to lower interest rates further to spur the economy. But Bernanke said other options remain, including the possibility of the Fed purchasing longer-term Treasury securities.

In New York, I’m Jeremy Hobson for Marketplace.