Ben Bernanke headed toward a cliff as US politics and markets collide

Regular watchers of Federal Reserve chairman Ben Bernanke could be forgiven a sense of déjà vu as he appeared before the Senate banking committee Tuesday.
Once again Bernanke fenced off questions about whether the US central bank will offer a fresh round of monetary stimulus. And yet again he warned that Europe’s woes and political rows in Washington threatened the economic recovery.
But his latest appearance came as he faces a difficult balancing act – weighing increasing pressure to act as the US’s fragile economic recovery wobbles against the political backlash that could come if he does move.
Economists are blaming slowing jobs growth and consumer spending on anxiety over Europe’s debt crisis and the so-called “fiscal cliff” – the expiration of Bush-era tax cuts and the imposition of $1tn in spending cuts set to occur on 31 December unless a political compromise can be reached.
Bernanke is concerned too and told the Senate the Fed had “made clear at its June meeting that it is prepared to take further action”.
But a third round of quantitative easing (QE3) – a massive bond buying program aimed at supporting the economy – could spark a political firestorm with Republicans ahead of November’s election.

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