More Fed bond buys possible: Bernanke

In a rare televised interview,Bernanke told the CBS programme “60 Minutes” the Fed’s actions are aimed at supporting what is still a fragile economic recovery,dismissing critics who argue the policy will lead to future inflation.

“This fear of inflation I think is way overstated,” Bernanke said in the interview.

“What we’re doing is lowering interest rates by buying Treasury securities,” he said. “And by lowering interest rates,we hope to stimulate the economy to grow faster. The trick is to find the appropriate moment when to begin to unwind this policy. And that’s what we’re going to do.”

Bernanke said it would take four to five years for the country’s unemployment rate,which rose to 9.8 per cent in November,to come down to what he called more “normal” levels of around 5 per cent to 6 per cent.

Asked if the central bank could go beyond the $600 billion of bond buys announced at its November meeting,Bernanke said: “Oh,it’s certainly possible. It depends on the efficacy of the programme. It depends,on inflation. And finally it depends on how the economy looks,” he said.

But he also did not rule out stopping short of the total. “We’re gonna be regularly reviewing this,” Bernanke said. “This is not something that we’ve set into automatic motion going forward. We want to continue to think about it. Whether it needs to be changed. Whether it needs to be increased or decreased or modified.”

The US economy grew at a modest 2.5 per cent annual rate in the third quarter,and more vigorous growth is needed to bring down unemployment.

The “60 Minutes” interview is as part of a broader effort to raise the Fed chairman’s public profile in order to counter critics of Fed policy — both in Washington and within the central bank itself.

The decision to offer further monetary stimulus at a time overnight borrowing costs are already effectively at zero and the banking system is awash with $2.3 trillion in Fed-created credit has proven controversial both at home and abroad.