QE3 is a real possibility, says Fed chairman Ben Bernanke

AMERICA may need a third dose of quantitative easing (QE) to avoid its economy slumping back into recession, Federal Reserve chairman Ben Bernanke predicted as he reported a gloomy outlook for the economy.

America’s recovery would suffer deflation and fail to become “self sustaining” without the Fed’s interventions, he claimed in a rare television interview broadcast on Sunday.

“It could be four or five years before we are back to a more normal unemployment rate,” he said.

Bernanke appeared keen to use his appearance on 60 Minutes to hammer home the message that America’s recovery is fragile.

But further QE was cautioned against by Federal Reserve Bank of Richmond President Jeffrey Lacker yesterday evening. Unemployment fears must not steer monetary policy, he said.