Federal Reserve chairman defends stimulus measures
Testifying before the Senate Banking Committee, Mr Bernanke was relatively upbeat about the broader US economy, which he said was growing again after pausing in the fourth quarter. But he said unemployment remained high.
"In the current economic environment, the benefits of asset purchases, and of policy accommodation more generally, are clear," Mr Bernanke said. "Monetary policy is providing important support to the recovery" even as inflation remains in check.
The Fed, which has amassed almost $US3 trillion in Treasury and mortgage-backed securities to promote more borrowing and lending, is expanding holdings by $US85 billion a month until it sees improvement in the labour market. It plans to hold short-term interest rates near zero at least until the unemployment rate falls below 6.5 per cent.
Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors, said the testimony was a "robust defence" of the aggressive efforts by the Federal Open Market Committee that "gives no ground to those within and without the FOMC who think asset purchases will soon need to be curtailed".
Frequently Asked Questions about this Article…
Ben Bernanke defended the Fed's economic stimulus as necessary and effective, saying it was likely to continue for some time. In testimony to the Senate Banking Committee he said monetary policy and asset purchases are providing important support to the recovery while inflation remains in check.
The Fed has amassed almost $US3 trillion in Treasury and mortgage-backed securities to promote more borrowing and lending, according to the testimony.
The Fed was expanding its holdings by $US85 billion a month and said it would continue that pace until it sees improvement in the labour market.
The Fed plans to hold short-term interest rates near zero at least until the unemployment rate falls below 6.5 percent, as stated in the testimony.
Bernanke said the broader US economy was growing again after pausing in the fourth quarter, but he warned that unemployment remained high.
He said inflation remains in check and that the benefits of asset purchases and policy accommodation are clear, with monetary policy providing important support to the recovery.
Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors, described the testimony as a 'robust defence' of the Federal Open Market Committee's aggressive efforts and said it gave no ground to those who think asset purchases will soon need to be curtailed.
The Fed's asset purchases and near-zero short-term rates are intended to promote more borrowing and lending and to support the economic recovery. Bernanke's testimony indicates these accommodative policies were likely to continue until the labour market improves, which suggests investors should expect continued policy support in the near term.
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