US Federal Reserve Chairman Ben Bernanke said on Tuesday the Fed will maintain ultra-easy US monetary policy for as long as needed,which could mean holding interest rates near zero until well after US unemployment falls under 6.5 per cent.
In a speech to the National Economists Club that echoed dovish comments by his nominated successor,Janet Yellen,Bernanke also said that while the economy had made significant progress,it was still far from where officials wanted it to be. The FOMC remains committed to maintaining highly accommodative policies for as long as they are needed, he told the club,referring to the policy-setting Federal Open Market Committee. US President Barack Obama nominated Yellen,the Feds current vice chair,to replace Bernanke when his term ends on January 31. The Fed has held interest rates near zero since late 2008 and quadrupled its balance sheet to $3.9 trillion through three massive rounds of bond buying.
It decided in October to maintain asset purchases at an $85 billion monthly pace. Bernanke said officials want evidence of durable job growth before scaling back buying.
The FOMC still expects that labour market conditions will continue to improve and that inflation will move toward the 2 per cent objective over the medium term. If these views are supported by incoming information,the FOMC will likely begin to moderate the pace of purchases, he said.
Fed officials meet next on December 17-18,although most economists dont think they will begin to scale back the bond buying until their meeting in either January or March.
However,possibly indicating some wariness with the bond buying,Bernanke said policymakers were not quite sure of the impact on the economy of changes in the pace of purchases,or in the size of the Feds balance sheet. The Fed has also promised to hold rates near zero until unemployment hits 6.5 per cent,provided the outlook for inflation stays under 2.5 per cent. But Bernanke said the Fed could be patient in waiting to start raising rates.
The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end,perhaps well after the unemployment threshold is crossed. Economists felt the distinction that the chairman drew between bond buying and its so-called forward rate guidance was telling.
Will write,speak during post-Fed life
WASHINGTON: US Federal Reserve chairman Ben Bernanke,in his first public comments on personal plans after he steps down from the Fed in January,said on Tuesday he will be writing and speaking on topics that have consumed his tenure at the US central bank.
Before I became a policymaker I was an academic,and I worked on a lot of issues which are related to the things I have been doing for the last 11 or so years,such as the role of financial markets and financial stability in the economy, he said. REUTERS