Bernanke, the chairman of the Federal Reserve and a Great Depression expert, has promised to not repeat the financial mistakes that led the U.S. to the economic woes of the 1930s. And thus far, he's been relatively faithful to that promise, keeping interest rates near zero since late 2008 and increasing the size of the Fed's balance sheet more than three times to $2.85 trillions.
However, cutbacks in government spending may end up taking control of the economy out of Bernanke's hands.
The Fed's next policy-setting meeting will happen on Tuesday, amidst growing worries that the United States may be backsliding into another recession as Europe teeters on the brink of an even deeper debt crisis. The fact that credit rating agency Standard & Poor's decided to lower the U.S.'s pristine AAA credit rating adds to the concern.
Nigel Gault, chief U.S. economist at IHS Global Insight, told Reuters that the Fed could promise to keep interest rates near zero or its balance sheet plumped for even longer than investors anticipate, or opt to buy even more U.S. government debt.
"It is hard to see any of these options as 'game changers,'" Gault said. "The Fed would be doing them not because it could be sure they would make a huge difference, but because it would feel the need to do something."
