By Robin Harding in Jackson Hole and Helen Thomas in New York

Published: August 29 2010 19:57 | Last updated: August 29 2010 19:57

Investors are braced for a week of crucial economic data that could decide the Federal Reserve’s next move after chairman Ben Bernanke said it would ease policy if the outlook deteriorated “significantly”.

But analysts cautioned that there was no guarantee of early Fed action despite Mr Bernanke’s pledge at the central bank’s conference in Jackson Hole, Wyoming, at the weekend that it would “do all that it can” to boost the faltering recovery.

Economists at Goldman Sachs, among the most bearish on Wall Street, argued that Mr Bernanke’s speech suggested that the central bank was taking a “minimalist approach” to further action for the time being. “The overall tone was one of watch and wait, despite ongoing signs that US economic activity has not only dropped below its potential growth rate but has a significant probability of weakening further, at least as we see it,” they wrote.

Joe LaVorgna, chief US economist at Deutsche Bank, agreed that the Fed did not appear ready to pull the trigger on additional monetary easing: “A meaningful deterioration in the outlook – ie financial market disruptions or a stalled labour recovery – would be necessary to push them into action.”

The mood at Jackson Hole was subdued, marked by warnings about a recent slowdown in the US recovery and continued high levels of debt. “The debt overhang bears the ultimate responsibility for slowing down the economic recovery,” said Jean-Claude Trichet, chairman of the European Central Bank.

A sustained rise in unemployment is one likely trigger for the Fed to launch further quantitative easing by buying billions of dollars of long-term assets such as Treasury bonds in an attempt to stimulate the economy.

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