Fed committed to ‘ultra-easy monetary policy’ for as long as needed
Bernanke says while US economy has made progress, there is still some way to go
US Federal Reserve Chairman Ben Bernanke (right) takes the stage to address the National Economists Club annual dinner at the US chamber of commerce in Washington. Photograph: Jonathan Ernst/Reuters
US Federal Reserve chairman Ben Bernanke said last night 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, Mr 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 Ms Yellen, the Fed’s current vice chair, to replace Mr Bernanke when his term ends on January 31st.
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.
Mr Bernanke said officials want evidence of durable job growth before scaling back buying.
“The FOMC still expects that labor 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 17th-18th, although most economists do not think they will begin to scale back the bond buying until their meeting in either January or March.