news details |
|
|
| Bernanke: Bond Buys Could Slow at 'Next Few Meetings | | | '
WASHINGTON—Federal Reserve Chairman Ben Bernanke said the central bank could begin winding down its $85 billion-a-month bond-buying program at one of its "next few meetings" if the economic data continues to improve, but he warned market participants that a step down in purchases won't mean the Fed has started a one-way march toward the exit.
In Fed Chairman Ben Bernanke's opening comments on Capitol Hill Wednesday, he says that despite recent advances, the job market remains weak. Photo: Getty
Federal Reserve Chairman Ben Bernanke reiterated his belief in the central bank's agenda and criticized policies he said are hurting the economy. Kathleen Madigan reports. Photo: Getty Images.
"We are trying to make an assessment of whether or not we have seen real and sustainable progress in the labor-market outlook," Mr. Bernanke said during a congressional hearing Wednesday, when pressed about when the Fed intends to end its easy-money policies.
If Fed officials see continued economic improvement and have confidence that it is going to be sustained "in the next few meetings we could take a step down" in pace of purchases, he said. At the same time, Mr. Bernanke said the Fed wants to be careful not to move prematurely on the policy shift.
When the Fed does take that step, Mr. Bernanke said it won't mean we are "automatically aiming for a complete wind-down," Mr. Bernanke said. "Rather we would be looking beyond that to seeing how the economy evolves and we could either raise or lower our pace of purchases going forward. Again that is dependent on the data," he said.
Overall, Mr. Bernanke's comments on winding down the bond-buying program indicate the Fed has a plan, but remains undecided about when to pull the trigger. When pressed further on timing, Mr. Bernanke declined to say whether the Fed would make this move by Labor Day.
On one hand, Mr. Bernanke warned that if the Fed moves to tighten too soon, it risks "slowing or ending the economic recovery and causing inflation to fall further." On the other, he said that labor market conditions "have shown some improvement recently," noting that non-farm job gains have averaged more than 200,000 per month over the last six months, a period that roughly equates to the launch of the latest round of bond-buying. Yet Mr. Bernanke concluded that the job market remains weak, a signal that officials do not yet see the substantial improvement they want to see before pulling back on stimulus.
Mr. Bernanke indicated that he was changing his view on what the Fed should do with its large mortgage-backed securities portfolio in the long run. In the past the Fed has said it plans to sell down the portfolio at some point. But on Wednesday Mr. Bernanke said he thought the Fed could allow the securities to mature and wind down on their own without selling, though the Fed hadn't yet made a decision on the matter.
In his prepared testimony, Mr. Bernanke defended the central bank's easy-money policies in testimony before Congress, saying it has yielded "significant benefits" for the economy but warned that the Fed can't offset the drag on growth presented by federal budget belt-tightening.
In listing the benefits of the Fed's easy-money policies, Mr. Bernanke noted that its "accommodative monetary policy has also helped to offset incipient deflationary pressures and kept inflation from falling even further below the Committee's 2% longer-run objective." The low inflation readings, noted by Mr. Bernanke, have led some observers to suggest the Fed would be reluctant to pull back on the bond-buying programs.
But Mr. Bernanke elsewhere in his testimony did not appear concerned by recent low inflation reports. "Longer-term inflation expectations continue to be well anchored," he said.
A number of Republican lawmakers on the panel criticized the Fed's current path.
"Quantitative easing has run out of steam," said Rep. Kevin Brady (R., Texas) who is chairman of the Joint Economic Committee. He said Fed policies weren't helping much, were punishing savers and may be inflating new asset bubbles. |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
|
|
|
|
 |
|
|
